MEREDA conference highlights 'worker gap'

January 20, 2017 in News

Author: Staff
Publication: Mainebiz

MEREDA conference highlights 'worker gap'

COURTESY / MEREDA
COURTESY / MEREDA
Cover of the latest MEREDA Index, a biannual economic indicator measuring the health of Maine's real estate sector.

​The Maine Real Estate and Development Association's bi-annual economic indicator measuring the health of Maine's real estate sector, The MEREDA Index, shows a significant "worker gap" that is driving up the cost and increasing the timeline of construction projects, according to a release about the index.

Unveiled at Thursday's sold-out annual MEREDA forecast conference, the index showed strong growth in the residential construction sector.

"Overall, The MEREDA Index has grown in the last years, though we are seeing the first plateau since the post-2007 recovery," Paul Peck, MEREDA president, a real estate developer and an attorney at Drummond & Drummond, said in a statement.​ ​"The second quarter of 2016 saw​ ​us reach the​ ​highest level ​in 10 years​, led by a 10% growth in the residential component."

All told, The MEREDA Index, which covers the middle two quarters of 2016, came in at 93​.

The second quarter of 2016 saw The MEREDA Index reach its highest level since 2006, led by a 10% growth in the residential component. But the second quarter's gains were not sustained into the third quarter, and at the end of the third quarter the index was just below its highest level since 2006.

The third quarter drop occurred primarily in the residential sector but also in the commercial sector. Over the past six months, the index grew 1.2% and over the year by 0.9%. Overall, the index indicates that recovery from the real estate recession continued, but slowed over the past year.

"​​The​ ​gains of the​ ​second quarter of 2016​ ​were not sustained into the third quarter, with a 4% drop relative the second quarter," said economist Charles Colgan of the University of Southern Maine, who compiled the report for MEREDA.​

Tackling the 'worker gap' ​

The lack of qualified candidates available to fill electrician, plumbing and other subcontractor positions that might be driving up the cost and increasing the timeline of construction has spurred MEREDA to launch a subcommittee with the Associated General Contractors of Maine to address the worker gap.

"The worker gap issue must be address if Maine is to benefit from continued economic investment, an expanded tax base in our neighborhoods and communities and a robust tourism economy," Peck said.

MEREDA's annual forecast conference featured more than half a dozen forecasts of future market activity by property type and geography, from top experts in the following categories: Maine's vacation and hospitality industry; southern Maine industrial, office, retail and residential; plus specific forecasts for the midcoast, Bangor area and central Maine markets respectively.

The new edition of The MEREDA Index was underwritten by Eaton Peabody, with support from CBRE | The Boulos Company, Wright-Ryan Construction and The Press Hotel.


Broad Street luxury apartment building fetches $3.12 million in sale

January 20, 2017 in News

Author: Nick Sambides Jr.
Publication: Bangor Daily News

BANGOR, Maine — A longtime Broad Street sporting goods store converted into luxury apartments has been sold to an out-of-state developer for $3.12 million.

The 18 luxury units at 28 Broad St. were sold by 28 Broad St. LLC to another limited liability corporation, New Hampshire-based Broad Street LLC, on Jan. 13, said Michael Cobb, a broker at Cardente Real Estate of Portland.

Friday’s closing capped 6½ months of negotiations, Cobb said Wednesday.

“It is an out-of-state investor who was interested. He liked the tenant mix and income ratios coming in from that. That’s where the number [sale price] comes from,” Cobb said. “On this type of property, in Bangor, I haven’t seen any other properties sell for this kind of price point.”

Former building owner Roy Hubbard said he and his partners were tempted to hang onto the building but the sale made sense.

“We certainly got a healthy per-unit price, which we are very happy about,” Hubbard said Wednesday. “I have mixed feelings about selling, but at the end of the day, I am not a landlord. I am a developer. My job is to bring something back to life. Then I find something else to bring back to life.”

The 27-year-old, who splits time between Connecticut and Maine, invested about $2 million and two years in renovations on the former Dakin Sporting Goods building. Hubbard bought the building for about $650,000. He opened three ground-floor apartments to public viewing in March 2016 during the Downtown Bangor Artwalk.

The building is currently fully occupied, and there is a tenant waiting list, according to Cardente Real Estate.

The site had been largely vacant since the late 1990s, when it briefly housed a coffee shop, cafe and TCBY yogurt shop. It also served as temporary headquarters for political campaigns.

Tanya Emery, the city’s director of community and economic development, said the sale price seemed about right.

“We knew it was for sale and it seems like a solid price for an exceptionally renovated building with strong occupancy numbers,” Emery said Wednesday.

Bangor is changing to accommodate people gravitating toward urban centers and a growing entertainment corridor, but still needs affordable rentals, officials said.

Hubbard is interested in continuing to rehabilitate buildings in Bangor, if he finds the right deal. Bangor’s market is growing, he said.

“It is scarce to find unused square footage downtown. When I got started, downtown the vacancy rates were incredible. It’s just not the case now,” Hubbard said. “I would be more inclined to do lower-rent apartments. I think with the higher-rent per-square-foot apartments, it’s hard to find space for that which could work. I think there is still a demand for that, but you need to get more people in there. It is easier for more developers to go lower-scale, to something more moderate.”

“I like Bangor,” Hubbard added. “It’s too expensive in Portland. Bangor is the only place I am really comfortable investing in. It is quieter and a lot more personal to me.”

Bangor Daily News writers Nick McCrea and Darren Fishell contributed to this report.


City of Portland prepares to put prime Bayside land on the market

November 14, 2016 in News

Author: Randy Billings
Publication: Portland Press Herald

Four acres of land with significant development potential near Portland’s downtown could be available for sale by the end of the year, according to the city’s economic development director.


Greg Mitchell said city officials will likely choose a real estate broker in the coming weeks for land used by the city’s Public Works Department in Bayside, launching a process that could alter the course of one of Portland’s long-struggling neighborhoods. The only restrictions placed on the sale would be the current zoning, Mitchell said, and the city is open to selling all of the land to one buyer, or selling it by the parcel.

Given the property’s location and zoning, which permits a wide range of uses, Mitchell expects that some sort of mixed-use development – including residential, office, retail and possibly a fitness center – could replace the current industrial-scale uses.

“I think this is an opportunity of a lifetime,” Mitchell said. “I think it would have a dramatic impact on spurring more investment in that area. Four acres is quite a piece of real estate in a downtown area. The redevelopment of that area could have a dramatic impact on setting a direction in an area.”

Moving Public Works out of Bayside has been a goal of the city since the 1990s. After toying with potentially moving the department out to Riverside Street, among other options, the city in 2013 began securing a 13-acre site at 212 and 250 Canco Road, an industrial area in the geographic center of the city.

Over the last year, the city focused more attention on the Bayside neighborhood, which is home to a multitude of social service groups, including the homeless shelters and soup kitchens. Last summer, the city directed more police attention to the area to deal with unruly behavior and made more of an effort to pick up litter, sweep the streets and rebuild sidewalks. It also has begun to rethink the way the city provides emergency food and shelter.

Given that the “midtown” project, including more than 400 apartments, has stalled and is possibly being revised again, residents in Bayside hope that the city’s effort to sell and redevelop the public works properties will go more smoothly, said Bayside Neighborhood Association President Steve Hirshon. He noted that after five years of planning for the midtown development, no shovel has hit the ground.

Hirshon suggested that residents are cautiously optimistic about the future.

“We understand there’s a lot of potential for development in the neighborhood, and obviously that’s exciting, but there’s the issue of: How do you maintain a neighborhood that managed to survive the fire of 1866?” Hirshon said, referring to the fire that destroyed a third of the city’s downtown area. “I think we’d like to maintain a semblance of what we have, and at the same time, welcome whatever new comes along.”

The estimated cost for relocating the Public Works Department is $15.5 million, with about $8.4 million already appropriated. On Monday, the City Council allocated $1 million from the recent sale of 3½ acres of land on Somerset Street to Federated Cos. for the midtown project toward upgrading facilities at Canco Road, leaving about $7 million in remaining costs.

Mitchell said most of the public works operations, except for its fleet services at 44 Hanover St., have been moved to Canco Road. Administrative offices at 55 Portland St. will remain for now, but that building may be put on the market at a later date.

Moving fleet services would require a new building at Canco Road, so that would not occur until funding is secured, either through a bond or using revenue from the sale of the land, or a combination.

The city expects to open bids from potential real estate brokers Tuesday, Mitchell said. “I would expect we would make decisions quickly in hiring a broker,” he said.

The city is looking to immediately list four properties and may list an additional three properties, all of which are scattered throughout the area generally bordered by Portland, Alder and Kennebec streets and Forest Avenue, according to a request for proposals for commercial real state brokers. The properties to be listed are 56 Parris St.; 82 Hanover St.-158 Kennebec St.; 65 Hanover St.-52 Alder St.; and 44 Hanover St.

The properties are split between two business zones, which in some cases allow for 105-foot-tall buildings. Two parcels – a nearly 1.3-acre site at 82 Hanover St. and a nearly 1-acre site at 44 Hanover St. – could potentially be combined, according to the RFP, which also contemplates extending Somerset Street to Hanover Street and realigning Kennebec Street to Forest Avenue. Other properties, namely 55 Portland St., 178 Kennebec St., and 181 Forest Ave., may also be put up for sale.

Mitchell said he suspects that existing brick buildings could be renovated and incorporated into any new development plan, while open lots and a metal shed at 44 Hanover St., which houses fleet services, could be remade from scratch.

Mitchell declined to say how much he believed the city could get for the property, other than to say it could be a “significant” amount.

He said the real estate market is strong, the property is close to downtown, and there is already development going on in Bayside, including the new Chipotle and Bangor Savings Bank locations on Marginal Way, the expansion of Bayside Bowl on Alder Street and the conversion of the Schlotterbeck & Foss building on Portland Street into market-rate housing consisting of a mix of 56 studio and one-bedroom apartments.

“I feel there is a very high level of interest,” Mitchell said. “We’re continuing to see development in Bayside and we’re in the center of that.”


Green Clean moves from leased space to new $425K Portland HQ

October 31, 2016 in News

Author: LAURIE SCHREIBER
Publication: Mainebiz

PORTLAND — A gung-ho cleaning service, Green Clean Maine, has been skyrocketing since its founding in 2007.


That's why founder and CEO Joe Walsh decided to buy larger quarters to house the business.

Walsh purchased the 4,768-square-foot, three-level office building at 583 Warren Ave. in Portland, just west of the Maine Turnpike/I-95 overpass, from Casey & Paige LLC for $425,000. The deal closed Sept. 16.

Amenities include 25 onsite parking spaces plus a two-bay garage and deck. Walsh was represented by Matthew Cardente and Mark Sandler of Cardente Real Estate. Mark Malone of Malone Commercial Real Estate represented the seller.

"Joe and I had been searching for properties over the past year," said Sandler. "This property fit perfectly into our mix of an owner/user investment property. Joe has the option to use a portion of the property to grow other aspects of his business or lease it out for extra income."

Reached by phone after attending the Goldman Sachs "10,000 Small Businesses" program in Boston, Walsh said the new space is about six times larger than the current leased space.

"We're moving out of an 800-square-foot space. It's tiny," he said. "I can't even believe we've been there that long."

The new building and grounds will allow for continued growth. That includes space for equipment for the field staff, supplies like low-moisture mop systems, high-performance commercial backpack vacuums, all-natural handmade cleaning formulas, cleaning trays, microfiber cloths, cotton cloths for glass, terrycloth mops for floors and microfiber dusters to get up high and down low.

There's now also more space for the growing administrative and customer service office staff and a laundry plant with washers and dryers. The crew launders 1,500 to 2,000 cleaning cloths per day, a production line where the company produces cleaning supplies and will eventually package them for consumer sales. Outside is a fleet of environmentally friendly electric hybrid or fuel-efficient vehicles.

The building is about 40 years old and in good shape, requiring minimal renovations such as paint and carpeting.

"It was already laid out in a way that, when I walked in I knew it would be great for us," said Walsh.

The move was planned for Oct 22-23.

Non-toxic cleaners can't keep up with demand

Walsh's entrée into cleaning services was a surprising turn from his previous career as an advertising salesman for the Sunrise Guide, a Westbrook-based publication about healthy and sustainable resources. He was approaching environmentally friendly residential cleaning services about advertising.

"Everyone I talked with who was doing it in a nontoxic way said they couldn't advertise because they already couldn't keep up with demand," he recalled.

The popularity of the service and the promise of good money meshed with his personal predilection for a clean and tidy home. He received a $5,000 grant from the Libra Future Fund and got his first client, a friend with a condo, in October 2007. He hired his first employee in January 2008. Now he has 30 employees and, he said, the company is the largest residential cleaning service in Maine, with about 400 subscribers, from Saco to Freeport, who register for an average of 3.5 to 4 years, with the average client signing up for bi-weekly service.

Recently, he was a finalist in the Maine Center for Entrepreneurial Development's "Top Gun" program, developing a vision for the company's future. Plans include additional services such as helping homeowners with other aspects of their lives, such as dog-walking, carpet-washing and concierge services.

Walsh plans to expand the commercial cleaning side. And he plans to increase production of natural cleaning supplies, which use baking soda, vinegar, essential oils and other plant-based ingredients. Customers often ask to buy his supplies, so he's developed product labels and is finalizing packaging for sales.

"This building will make room to add divisions and service lines as we grow," he said.

Also, the property is over two acres, so there's enough land and buffer to add at least another 5,000 square feet of space.

"That's part of the property's appeal as well," he said.

So why does he like to clean?

"I'm a little bit of a perfectionist," he said. "It's the satisfaction you get from making something just right, starting off with something dirty or chaotic and making it clean and neat. But what I didn't like was the chemical part. I was interested in creating an environmental benefit and making money at the same time."

Editor's note: Green Clean Maine cleans the Mainebiz offices.


Three solid quarters in 2016 and counting for southern Maine's commercial real estate market

October 31, 2016 in News

Author: Matthew Cardente
Publication: New England Real Estate Journal

Heading into the 4th quarter of 2016, the commercial real estate market in Southern Maine remains strong with no immediate signs of a slowdown. Several key indications of the ongoing market strength include low / declining vacancy rates, high buyer demand, and limited supply of investment grade properties.



Office

Year to date, the leasing market for higher end office has performed well for landlords in Portland and the surrounding municipalities. One prime example is Ocean Gate Plaza located at 511 Congress St. in Port- land. Approximately 100,000 s/f of this 130,000 s/f complex consists of nine stories of class A office space that is currently 100% leased. At the time the property was purchased in March of 2014, the office vacancy rate for the office tower was closer to 9%. CBRE, The Boulos Co. produces an annual office market survey based on approximately 12 million s/f of class A and B office in Greater Portland. “The overall office vacancy in Greater Portland continues to trend downward and is likely in the 5% range heading into the 4th quarter”, said Drew Sigfridson, managing director & partner of CBRE the Boulos Company, “ We have witnessed a flight to quality over the past year with class A office vacancy rates likely below 4% for both suburban and downtown buildings. However, class B and lower quality product continue to experience prolonged vacancies.”

Retail

Southern Maine’s retail market is flourishing as well. In March, the 13-acre Falmouth Plaza was pur- chased by developer Matthew Orne for $11.55 million on Feb. 2, 2016. Located approximately 10 minutes from downtown Portland, the purchase chase of retail complex included a 92,000 s/f Wal-Mart and the adjacent vacant Regal Cinema. Later this year, Flagship Cinemas leased the former cinema and is now open for business after the 15,000 s/f unit was vacant for four years. Steve Baumann of Compass Commercial Brokers handled the sale and cinema lease for the new owner. Other positive signs for the market is the lack of inventory for lease in the major retail districts of Greater Portland. According to the New England Commercial Property Exchange database, as of mid-October 2016, there were a total of 40 retail listings for 1,000 – 3,000 s/f in Port- land and South Portland combined. These cities includes Portland’s Old Port and the Maine Mall district. The same database indicated that there were a combined total of thirteen retail units ranging from 5,000 – 10,000 s/f and four 15,000 – 200,0000 s/f retail boxes available in total for Portland and South Portland.

Industrial

Greater Portland’s industrial mar- ket is seeing increased price points, low inventory, and tenant/buyer com- petition. In part, this is due to high de- mand from marijuana cultivators and breweries that have been expanding into the marketplace. “Over the last six years, industrial lease rates and sales prices have consistently trended and vacancy rates have dropped,” said Justin Lamontagne, partner at The Dunham Group out of Portland. “We anticipate a 3-4% vacancy rate for Greater Portland industrial space by year end 2016.”

Investment & Owner Occupant Sales

Southern Maine’s commercial sales for investment and owner occupant properties is arguable the hottest market. Owner occupants continue to take advantage of the historically low vacancy rates. Formerly tenants, these new owner occupants are often paying less on their mortgage than they were on their former lease rate. For Maine investors, the continuation of low interest rates combined with the state’s attractive capitalization rates has made investment properties scarce within the region. Capitalization rates for higher end office, retail, and industrial properties are currently trending between 8-9.5% in the prominent marketplace; 7-8% for premium multi-units and properties offering long-term leases from high credit tenants. Investments sales in secondary markets and higher risk properties are offering capitalization rates 9.5% to above 10%. These types of capitalization rates are not as prevalent in other states in New England making Maine a prime target for local and national investors.

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