It’s going to get worse before it gets better. That phrase wasn’t what attendees wanted to hear, but that was the take-away message at the Maine Real Estate and Development Association’s 2009 Annual Real Estate Forecast Conference, held Jan. 29 at the Holiday Inn by the Bay in Portland. Presenters from all of Maine’s real estate sectors — office, industrial, residential and hospitality — provided, with varying degrees of grimness, a 2008 year-in-review and predicted an even tougher year in 2009. Maine’s retail market was no exception. The state, like the nation, is suffering from what industry experts are calling the market ’s worst contraction in 35 years, as national retailers like Circuit City and Linens ‘n Things go out of business. The sour market has also put the brakes on retail development in the state, including the planned $8 million expansion of the Maine Mall, which owners General Growth Properties recently decided to postpone indefinitely becaus e of the weak economy — the second planned expansion the Chicago firm has scrapped in Maine since 2008. (Continued on PDF)

Some of the storefronts that line the heart of one of Maine's iconic shopping districts are emptying.

In the past few months, a number of shops have moved out of Portland's Old Port to less expensive locations, or have shut down completely.

The recession, coupled with comparatively high rents, has led to the flight of many stores, say retail market watchers. The Old Port's market, once red-hot, has cooled considerably in the past two years, since the days when merchants vied for space along the district's most popular tourist routes.

The trend mirrors what is happening in many other such locations nationally, such as Boston's Newbury Street.

"We are seeing this migration of tenants," said Matthew Cardente of Cardente Real Estate, a Portland commercial real estate company.

Store closings along the busiest street in the Old Port – Exchange – highlight what has happened in recent months.

Edith & Edna's, a craft gallery at 51 Exchange St., and Simply Chic women's clothing shop at 28 Exchange St. announced late last fall that they would be closing for good after Christmas. (Continued on PDF)

After an ownership that began in 1844, J.B. Brown & Sons has sold its multi-tenanted office building at 482 Congress Street in Portland. Finalized in May, the property was sold to Edmund Wheeler who also owns 511 Congress Street located across the street. The sale included a 52,610+/- square foot office building and an adjacent parking lot that faces the Cumberland County Civic Center. “I think the sale was a win for both Edmund Wheeler and J.B. Brown & Sons,” says Matthew Cardente of Cardente Real Estate who brokered the sale of 482 Congress Street and also handles the brokerage for several other properties owned by J.B. Brown & Sons.

“Finding solid investment properties in Downtown Portland has been difficult over the last several years, and this property offers long term upside to the buyer. On the other hand, J.B. Brown & Sons can focus even more of their attention to reshaping its properties that offer additional development potential.”

On February 13, President Bush signed into law the Economic Stimulus Act. While most of the attention is focused on the dispersal of rebate checks to taxpayers, there are also a couple of significant tax-saving provisions geared toward landlords, developers, business owners, and tenants.

Our overview will be on the provision called bonus depreciation.

Bonus depreciation was first introduced following September 11, 2001, but the policy expired at the end of 2004. It was reintroduced with the Economic Stimulus Act of 2008 to both encourage new construction and the purchase of depreciable assets.

For landlords, developers, business owners, and tenants the provision allows for a 50 percent write-off of qualified leasehold improvements in 2008. This is a drastic change from the 2.5 percent per year allowed since 2006.

The idea is to encourage improvement to existing non-residential properties that are more than three years old. For example, renovation of a Class B office building into a more-sought-after Class A building to meet the requirements of a prospective tenant. (Continued on PDF)

Escalating land prices and skyrocketing construction costs have contributed to a real estate market that has developers pressing hard to find profitable projects.

We all know the cost of construction has increased significantly recently, but land prices are all but pricing developers and owner/users alike out of the market, and at the very least, making quality new developments scarce.

For developer, picture this scenario: A major national retailer or developer builds a regional shopping center anchored by multiple big-box stores and several baby-box stores. Throw in some national restaurant chains and banks, and suddenly local land prices spike upward.

Let’s say it costs $250 per square foot to buy land and build a quality small retail center in this neighborhood. To be adequately profitable, a developer will look for $25-$30 per square foot NNN in lease rates. If tenants in the market are willing to pay only $15-$20 per square foot NNN, the project will stall.

Stalled projects have been occurring more often in Maine, as a reality of high land and construction costs converges with the reality of tenant budgets. (Continued on PDF)