Sunday, December 8, 2013
Maine's real estate and construction activity has been on a downward trajectory since early 2012, according to a new statewide index set to debut Wednesday.
Steel workers position beams Tuesday at the construction site for a new Marriott hotel on Commercial Street in Portland. Despite a spate of new hotel projects in Portland and a 2012 surge in home construction in southern Maine, many areas of the state still are struggling to recover from the effects of a real estate slump in 2009.
Photos by John Ewing/Staff Photographer
The Hyatt Place hotel is going up on Fore Street in Portland.
Still, the overall picture painted by the index is one of mild recovery in the real estate market since the economic recession began, local experts said. Commercial developers and real estate brokers in Portland said they expect to see that recovery continue.
The index, developed by the Maine Real Estate & Development Association, or MEREDA, and a University of Southern Maine researcher, is a composite indicator representing all residential real estate, commercial real estate and construction activity in the state.
Activity in the first quarter of this year fell to about 70 percent of what it was in the first quarter of 2006, at the peak of the current real estate cycle, according to the MEREDA Index. Real estate activity tends to rise and fall in regular cycles that correspond to periods of economic growth and decline.
Despite the decline since the first quarter of 2012, when southern Maine experienced a surge in residential and commercial construction, MEREDA Index researcher and USM professor Charlie Colgan said there are signs of a nascent recovery in the numbers.
"The basic story is that the real estate market, like the economy, has shown a significant start to the recovery," said Colgan, professor of public policy and management at USM's Muskie School.
Colgan said the index indicates the housing market has picked up in recent months, while commercial real estate activity has remained relatively flat.
The MEREDA Index is a composite of several indicators representing different aspects of real estate and construction activity, including commercial and residential property sales, construction employment, lease rates, mortgage loan originations and vacancy rates.
Each indicator is weighted to reflect its relative importance to the real estate market, said Drew Sigfridson, MEREDA's president and a commercial real estate broker with CBRE/The Boulos Company in Portland.
Commercial real estate indicators comprise 50 percent of the index, residential real estate is 40 percent, and construction activity is 10 percent, Sigfridson said.
Despite some recent positive indicators in the market, such as a 2012 surge in home construction in southern Maine and a spate of new hotel projects in Portland, many areas of the state still are struggling to recover from the effects of a real estate slump that hit Maine in 2009.
"In other parts of the state, there are a lot of lagging things that we're still dealing with from the recession," Sigfridson said.
Those include reduced real estate prices, fewer commercial-property sales and a decrease in company expansions as employers look to use existing space more efficiently, he said.
Even in relatively thriving Portland there remains an excess of empty office space, Sigfridson said, but demand has been creeping back in recent months.
"It's going to be a long, slow, steady increase and recovery," he said.
Developer Tim Soley of East Brown Cow Management Inc. in Portland is bullish on the real estate industry's future, especially in southern Maine.
East Brown Cow is developing the 80,000-square-foot Hyatt Place Portland-Old Port hotel project at Union and Fore streets in downtown Portland, scheduled to open in the spring of 2014.
Soley said he has several smaller projects under way, too.
He said he has seen a real improvement in demand for new development, which he expects to continue.
"Hospitality is on fire, and medical office is growing," Soley said. "It's sort of hitting a crescendo that we haven't experienced in the last four or five years."
J. Craig Anderson can be contacted at 791-6390 or at: