It's still a sellers market

April 27, 2008 in Articles

Author: Nathan DeLois
Publication: Portland Press Herald/Maine Sunday Telegram

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)

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