Big businesses unable to find suitable space in Maine are expanding or relocating in other states due to the exceedingly tight industrial real estate market.
Justin Lamontagne, a commercial broker with the Dunham Group, said he’s personally represented two such companies in the last three years that moved out of Maine and redirected their growth to the midwest. He declined to name them.
Industrial market vacancy rates in Maine hit a record low in 2023. While the rate has recovered some since then to just above 2 percent, it is still below 1 percent in the greater Portland area, where demand for space is greatest. Within a 10-mile radius of the city, there is more than 19 million square feet of industrial space yet just 131,000 available.
“This is a striking fact and … simply bad for business in the Portland area.” Lamontagne wrote in his group’s mid-year market report, published last week.
This crunch mostly affects larger businesses seeking 100,000 square feet or more, about half the size of a typical Walmart superstore. Prohibitively high costs of new land and construction — similar to the residential market — are leading Lamontagne’s clients to choose between obsolete spaces or those in less accessible rural areas if they remain here.
Often, they are moving out of state. What’s more concerning to industry insiders like Lamontagne is that demand and “overall call volume” has slowed.
“Our sense is that the rising interest rate environment and inflation that has impacted general consumers has finally caught up to industrial users as well,” Lamontagne said.
Real estate agents active in Maine’s residential market are also seeing some clues that things are leveling off. High interest rates, waning demand since the COVID pandemic brought a wave of in-migration to Maine and added supply mean that homes are now sitting on the market for longer, and some sale prices are being slashed.
But in both the residential and industrial markets this “cooling” effect is only relative to the last four years. The market is still historically supercharged, and there’s still not nearly enough inventory in Maine to keep pace with demand from businesses here.
“We saw a steady increase in industrial supply from 2019 to 2022, but I don’t think it was enough,” Lamontagne said. “And with construction costs as high as ever and development timing still comparatively slow, I am concerned we have missed our opportunity to really make a dent in the supply/demand imbalance.”
