The greater Portland office market continues to improve. We are seeing a slow descent in the vacancy rate. Last year’s vacancy rate was 6.52% down 1.32% from 2014. There has been a slight increase in asking rates across the market. We are starting to see more and more repositioning of office space to retail which is tightening up the amount of available office space. Office market transactions continued to increase in 2015. We should see more of the same this spring. Some significant sales last year in the office market were; 1 & 2 Portland Square in Portland which consists of 255,000 s/f sold for $66.1 million, 100 Middle St. in Portland which consists of 195,000 s/f sold for $35.3 million and 400, 500 & 600 Southborough Dr. in South Portland which consists of 111 million s/f sold for $11 million.
The greater Portland retail market is booming. Vacancy rates are at 3.6%. Clothing and food industry establishments are leading the charge. We should see more of the same for the retail market through 2016. Lease rates continue to increase for prime locations. Though, Falmouth and Windham have not been experiencing as much of an increase as most other southern Maine towns. I have a significant amount of clients in the Windham area and we are beginning to see interest again because of the values compared to Portland. Scarborough Gallery added the much anticipated relocation of Home Goods, Marshalls, Bob’s Furniture and PetSmart, The Maine Mall continues to thrive with almost no vacancy. New restaurants are opening every week such as Tilted Kilt, Guerrero Maya, Duffy’s, Ground Round and Elevation Burger. Some significant sales last year in retail included; Shops at Long Bank in Kennebunk selling for $6.9 million and 740 Broadway Strip Center selling for $4 million.
The Southern Maine Industrial market will continue to see low vacancy rates and slightly higher lease rates. We should see lease rates start to hit $6 NNN. Last year’s vacancy rate went down .75% to 3.38%. Small to medium sized businesses have been driving this sector. Some significant sales in this market were; 55 Hutcherson Dr. in Gorham which consists of 114,232 s/f and sold for $4.875 million, 28 Pond View Dr. in Scarborough which consists of 74,976 s/f and sold for $5.38 million and 135 Walton St. in Portland which consists of 56,127 s/f and sold for $1.745 million.
Multifamily sales continued to surge in Portland, Saco/Biddeford, Lewiston/Auburn and Westbrook markets. They had an increase of 26%, 21%, 44% and 27%, respectively in 2015. The towns and cities above will continue to see strong sales in 2016 with buyer demand exceeding supply. Rents will continue their escalation in the Portland area. Rents in other towns should increase moderately. We will continue to see more market rate development in Portland. Some notable sales last year in residential were; 309 units with three complexes that sold for $50.25 million, East End Corp. with 74 units sold for $6.97 million and 125-133 Grant St. with 74 units sold for $4.34 million.
The hospitality market is still going strong. We saw the opening of several new hotels in 2015 including The Press Hotel in downtown Portland. Nightly rates continued to rise modestly. Occupancy on the Portland Peninsula increased 3.6%. South Portland was also a strong market adding two new hotels. Windham’s first and only hotel opened its doors in 2015. We should continue seeing an increase in rates and occupancy going into the summer, with tourism at its peak.
Moving ahead, all sectors of the commercial market in southern Maine should remain robust. The investment market will continue to thrive, land interest and new construction will increase, lease rates will continue to move up slightly, and vacancy rates will continue to decrease slightly in Greater Portland.
Mark Sandler is a broker for Cardente Real Estate, Portland, Me.