Despite the months of lower than average temperatures, there was a great deal of activity on the Portland peninsula in the first half of 2014. Since CBRE | The Boulos Company released its 2014 Market Outlook in December 2013, three premier hotels have opened for business, a fourth hotel is under construction, several restaurants and retailers have successfully entered the market and a new cruise line has come to town. Suffice it to say, these are positive signs for sustained growth and longevity in the Portland marketplace.
The aforementioned is very encouraging and prompts the question: What about the state of the current downtown office market? Is there evidence of said growth and expansion in this market, too? For over sixteen years, CBRE | The Boulos Company’s office market survey has been a local barometer for assessing the health of the downtown class A office market. By tracking available square footage and vacancy rates for the 24 class A buildings on the Portland Peninsula, we’re able to assess overall vacancy shifts/trends in the office sector and make predictions on where the market is headed.
Considering the abundance of activity in 2013, one would assume this will continue for the foreseeable future. In an effort to support this assumption with facts, we’ve collected data on the 2014 office market thus far.
Historical Trends
in the Marketplace
The downtown Portland class A office market has shown significant improvement in recent years. Although there has been a lack of additional office product via new construction, the recovering economy and renewed confidence from locally based companies has led to a significant increase in leasing. Of the 2,025,616 s/f class A product in Downtown Portland, overall vacancy in December 2013 was 167,848 s/f, down from 250,322 s/f in 2012 and 295,359 s/f the year before that. Vacancy rates have decreased significantly from 14.57% in 2011 to 12.37% in 2012. Finally, the class A vacancy rate reached single digit status at 8.29% in 2013.
A number of lease deals bodes well for the overall market so far this year:
• 254 Commercial St. (Merrill’s Wharf) - Nova Star Cruises signed a 3,100 s/f office lease
• 100 Middle St. - RBS Citizens signed a 3,346 s/f office lease renewal
• Two Portland Sq. - Raymond James & Associates signed a 8,160 s/f office lease
• 25 Pearl St. - Cash Star signed a 21,550 s/f office lease
• One Canal Plaza - Gilman & Pattershall signed a 2,529 s/f office lease
• One Portland Sq. - Low Income Housing Corp. signed a 3,684 s/f office lease.
• One Monument Square - Putney signed a 25,340 s/f office lease
One can assume that the office market is on a healthy and stable track. What do the numbers say?
This mid-year rate of 6.76% is a significant decrease from a vacancy rate of 8.29% less than a year ago. Our prediction holds true for now and we are pleased with the current path of the downtown office market. Assuming the inventory of class A product does not change in the next six months, overall vacancy should continue to tighten in 2014, and there may be new office development on the horizon which is very encouraging.
Tyler Hobbs is associate broker for CBRE | The Boulos Company, Portland, Me.