2013 Greater Portland Office Market Survey
2013 Greater Portland Office Market Survey A trend continues in the Greater Portland office market, with 2013 posting a 2nd consecutive year of positive results in both downtown and suburban markets. Overall vacancy declined by nearly a full point, down to 10.04% and nearly three full points below the peak of 12.92% just two years ago. Net absorption was positive for a 3rd consecutive year, up by 151,358 SF or 1,52%- the largest single year increase since 2005 Leasing activity is up by 1.5%, a 6th consecutive positive year, with an average annual increase of 6.45% since the low in 2007. Asking rental rates on a weighted average basis were up sharply for the year, increasing by 4.0% across all Class A&B sectors both downtown and suburban. Sales activity remains sparse in the office market, with the supply of available investment properties limited and demand still decidedly high. Downtown results were sharply positive for a 2nd straight year, with overall vacancy of 11.3% and positive net absorption of 113,805 SF or 2.48%. In the past two years alone the downtown market has witnessed a drop in overall vacancy by over 5% and a corresponding increase in net absorption by a total of 190,000 SF or 4.1%. Asking rents over that same period have declined some, a likely contributor to the strong results. The only notable downtown sale in 2013 was the 10story, Class B tower at 465 Congress Street. On the plus side for landlords, asking rental rates spiked by 8.25% in the Class A sector and by 8.6% in Class B.
Notable Office Sales
There were two notable sales – 70 Gray Road, Falmouth (Class A investor sale, fully leased to TDBank) and 340 County Road, Westbrook (Class B owner-user purchase by Husson College). Suburban results were not as strong as downtown, but still favorable for the year. Overall vacancy was even with 2012 at 8.96% (noticeably below the 5-year average of 9.95%) and net absorption was positive by 37,553 SF or .70%. National office market vacancy ended the year at 15.6%, down roughly 1% from the prior year, with net absorption positive by .80%. Rental rates appreciated by 2.4% nationally, and more regionally increased by 5.3% in the Boston central business district. Vacancy continues to drop in Boston, with over- all vacancy now down to 10.5% in the central business district and 18.7% in the suburbs. New construction in Boston remains hot, with 3.6 million square feet planned for 2014 (a 2% bump in rentable SF there).
Downtown 2013 was a strong year for the downtown office market. Overall vacancy dropped for a 2nd year in a row, down 2% to 11.3%, and net absorption was positive by 113,805 SF or 2.48%. This is the largest single-year of positive net absorption for downtown in well over a decade. Correspondingly, downtown asking rental rates increased by roughly 3%. The Class A sector posted the strongest results, with overall vacancy down a full 3.5% to 11.01% (direct vacancy alone dropped 4.53%). Organic growth by local tenants propelled these results, with healthy absorption at Two Monument Square (US Coast Guard leased 20,363 SF, Liquid Wireless leased 4,715 SF, and SurePoint leased 6,001 SF), One Monument Square (Putney Vet leased 25,340 SF, PDA leased 11,196 SF, and Unum leased 4,828 SF), and Two Portland Square (Stone Coast expanded by 9,923 SF). The net result was positive absorption of 77,483 SF or 4.52%. Further- more, Baker Newman Noyes renewed their lease of 32,677 SF at 280 Fore Street and Maine General Services renewed for 15,660 SF at One Portland Square.
Suburban The Class B sector also posted healthy results for the year, with overall vacancy down 1.16% to 11.47%. The “organic growth” theme continued at 562 Congress Street (Spinnaker Trust and Diversified Communications added 15,000 SF), 27 Pearl Street (Burns & McDonnell expanded by 10,020 SF) and 100 Commercial St (CEI expanded by 5,381 SF). Also contributing were the Goodwill Industries lease of 31,340 SF at 75 Washington Avenue and LeBlanc and Young’s lease of 9,299 SF at Four Canal Plaza. In total, the B sector absorbed 36,322 SF or 1.26% for the year. In 2013 the upward trend continued in the suburban office market, now with a 4th consecutive year of reduced/flat overall vacancy and positive net absorption. Vacancy was even with the prior year at 8.96% but net absorption was positive by 37,553 SF or .70%. Also of note, asking rental rates increased by roughly 8.4%
The Class A sector posted the healthiest results, with overall vacancy dropping by 1.14% to 7.41%, the lowest level there since 2007. Tenant expansions were strong, with TRC Environmental expanding into 15,771 SF at 6 Ashley Drive, Scarborough, Intermed expanding by 12,247 SF at 100 Gannett Drive, South Portland, and Mortgage Network taking 10,000 SF at 300 Southborough Drive, South Portland. The net result was positive absorption of 37,345 SF or 1.51% and increased asking rental rates by 8.25% The Class B sector was the only market in our survey with flat absorption and increased vacancy. Direct vacancy was even with 2012 at 8.87%. However, sublease vacancy jumped with the Martin’s Point offering of 40,730 SF at 901 Washington Avenue, Portland. The result was an increase in overall vacancy by 1% to 10.29%, roughly even with the 5-year average for this sector. On a positive note, full-building lease-ups at 200 Enterprise Drive, Scarborough (Fluid Imaging for 16,771) and 2338 Congress Street (Granite Bay Care for 9,797 SF) balanced the results, while asking rental rates increased by 8.6%.
Notable Office Sales
There were two notable sales – 70 Gray Road, Falmouth (Class A investor sale, fully leased to TDBank) and 340 County Road, Westbrook (Class B owner-user purchase by Husson College). Suburban results were not as strong as downtown, but still favorable for the year. Overall vacancy was even with 2012 at 8.96% (noticeably below the 5-year average of 9.95%) and net absorption was positive by 37,553 SF or .70%. National office market vacancy ended the year at 15.6%, down roughly 1% from the prior year, with net absorption positive by .80%. Rental rates appreciated by 2.4% nationally, and more regionally increased by 5.3% in the Boston central business district. Vacancy continues to drop in Boston, with over- all vacancy now down to 10.5% in the central business district and 18.7% in the suburbs. New construction in Boston remains hot, with 3.6 million square feet planned for 2014 (a 2% bump in rentable SF there).
Downtown 2013 was a strong year for the downtown office market. Overall vacancy dropped for a 2nd year in a row, down 2% to 11.3%, and net absorption was positive by 113,805 SF or 2.48%. This is the largest single-year of positive net absorption for downtown in well over a decade. Correspondingly, downtown asking rental rates increased by roughly 3%. The Class A sector posted the strongest results, with overall vacancy down a full 3.5% to 11.01% (direct vacancy alone dropped 4.53%). Organic growth by local tenants propelled these results, with healthy absorption at Two Monument Square (US Coast Guard leased 20,363 SF, Liquid Wireless leased 4,715 SF, and SurePoint leased 6,001 SF), One Monument Square (Putney Vet leased 25,340 SF, PDA leased 11,196 SF, and Unum leased 4,828 SF), and Two Portland Square (Stone Coast expanded by 9,923 SF). The net result was positive absorption of 77,483 SF or 4.52%. Further- more, Baker Newman Noyes renewed their lease of 32,677 SF at 280 Fore Street and Maine General Services renewed for 15,660 SF at One Portland Square.
Suburban The Class B sector also posted healthy results for the year, with overall vacancy down 1.16% to 11.47%. The “organic growth” theme continued at 562 Congress Street (Spinnaker Trust and Diversified Communications added 15,000 SF), 27 Pearl Street (Burns & McDonnell expanded by 10,020 SF) and 100 Commercial St (CEI expanded by 5,381 SF). Also contributing were the Goodwill Industries lease of 31,340 SF at 75 Washington Avenue and LeBlanc and Young’s lease of 9,299 SF at Four Canal Plaza. In total, the B sector absorbed 36,322 SF or 1.26% for the year. In 2013 the upward trend continued in the suburban office market, now with a 4th consecutive year of reduced/flat overall vacancy and positive net absorption. Vacancy was even with the prior year at 8.96% but net absorption was positive by 37,553 SF or .70%. Also of note, asking rental rates increased by roughly 8.4%
The Class A sector posted the healthiest results, with overall vacancy dropping by 1.14% to 7.41%, the lowest level there since 2007. Tenant expansions were strong, with TRC Environmental expanding into 15,771 SF at 6 Ashley Drive, Scarborough, Intermed expanding by 12,247 SF at 100 Gannett Drive, South Portland, and Mortgage Network taking 10,000 SF at 300 Southborough Drive, South Portland. The net result was positive absorption of 37,345 SF or 1.51% and increased asking rental rates by 8.25% The Class B sector was the only market in our survey with flat absorption and increased vacancy. Direct vacancy was even with 2012 at 8.87%. However, sublease vacancy jumped with the Martin’s Point offering of 40,730 SF at 901 Washington Avenue, Portland. The result was an increase in overall vacancy by 1% to 10.29%, roughly even with the 5-year average for this sector. On a positive note, full-building lease-ups at 200 Enterprise Drive, Scarborough (Fluid Imaging for 16,771) and 2338 Congress Street (Granite Bay Care for 9,797 SF) balanced the results, while asking rental rates increased by 8.6%.
