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Following a lackluster 2020, the commercial real estate market in Maine experienced strong increases in sales and leases in 2021 despite work-from-home trends, a real estate group said Tuesday.
There were 575 commercial transactions in 2021 compared with 325 in 2020, according to the real estate group MEREDA, which held its annual spring conference in Portland on Tuesday.
The amount of square footage sold and leased also increased by 1.6 million square feet over 2020 across the state. Commercial real estate includes office, retail and industrial buildings.
Vacancy rates for industrial properties, which saw the strongest growth in the commercial market, were less than 2 percent as more people began to see them as an investment, Katie Allen, a broker with The Dunham Group, said.
“There’s virtually nothing available in terms of investment-grade properties,” she said. “That is really unheard of.”
She was surprised by the high values of the properties sold or leased because of the lack of inventory, saying, “I think we broke some records for sure during 2021.”
Part of the reason for the high activity in the industrial market is that most businesses using those buildings continued operating during COVID-19 and were not shut down temporarily as were many office buildings, she said. The redevelopment of the former Scarborough Downs harness racing track also added new inventory to the market in greater Portland.
The retail portion of the commercial market experienced larger vacancies in suburban areas. The downtown Portland market lost several restaurants and retailers, but those were often quickly replaced by another business.
“Tenants who have been trying for years to get into the Old Port now had the opportunity,” Allen said.
The results for office space were mixed because of uncertainty by businesses over back-to-work plans. Some tenants with lease expirations in 2021 or later whose employees could work from home chose to abandon their space. Another trend was tenants choosing very short-term renewals.
Most landlords accepted these renewals, often on less than favorable terms, to keep the vacancy rate down and to have an option at future renewals, she said.
“The real impact of COVID-19 on the office market has yet to be seen,” she said.
