Homes are in short supply in southern Maine, but the industrial market is faring even worse after available properties fell to a historic low in 2023, according to a report released Tuesday.
The industrial vacancy rate dipped below 1 percent in greater Portland last year, said the Dunham Group, a commercial real estate agency that began tracking the market in 2011. In the growing suburbs of Cumberland, Freeport, Gorham and Yarmouth, the industrial vacancy rate was 0 percent in 2023.
This is bad news for bringing new businesses to Maine and for existing businesses that want to relocate or expand. The rate in southern Maine is far lower than the national average, and it also makes the housing shortage pale by comparison. Last year, 2.3 percent of homes statewide were vacant and available, according to a state-sponsored study.
“It’s definitely a landlord’s market,” Sam LeGeyt, a broker with the Dunham Group who co-authored the report, said. “When a tenant comes up for renewal, the landlord has quite a bit of leverage whether it be rental rates or any other types of concessions.”
Nationwide, the vacancy rate was above 5 percent in the third quarter of 2023, according to Colliers. It is not a new issue in Maine, where vacancy rates have been trending downward since the onset of the COVID-19 pandemic.
It is due in large part to the prohibitively high costs of construction in recent years that have led to fewer properties being built, LeGeyt said. Moreover, the success of microbreweries and cannabis businesses have led to more expansions in those industries, taking up valuable space.
Many of the industrial properties that are vacant now aren’t necessarily attractive prospects, the broker said. They often have deficiencies like a short ceiling height, poor location, scant parking or are lacking easy access. Tenants aren’t inclined to lease them.
“This small percentage of space is available for a reason,” the report says. “And it’s not lack of demand.”
There could be opportunities outside of greater Portland where vacancies are higher. In northern York County, the vacancy rate was 1.5 percent last year, and in the Lewiston-Auburn area it was 5.8 percent, according to the Dunham Group.
While some businesses might relocate to those regions, or elsewhere in Maine, if there’s not a large enough workforce in those areas, potential tenants might be turned away. That is when businesses will likely turn to other states, underscoring the problems, LeGeyt said.
The businesses that remain are starting to map out contingency plans. LeGeyt and other commercial brokers predict that more big-box retail spaces will be converted into distribution or warehousing space in the near future. Office buildings are being surveyed by tenants for conversion in the greater Portland area, he said, a sign of how willing businesses are to compromise to find a suitable space to grow.
But those are mostly patchwork solutions. Going forward, cities and towns will have to maximize existing retail and office space and rezone available land for industrial purposes to meet demand, LeGeyt said.
“I think we need to start setting aside more land for industrial zoning in addition to a lack of inventory,” he said. “In southern Maine, we don’t have a lot of industrial zoned land, so we’re getting to the point where even if somebody did want to build something new, land is a scarce asset.”
