On May 25, Stephen Nahley, Chief Operating Officer & General Counsel, East Brown Cow, was a commentator for the Maine Real Estate & Development Association’s (MEREDA’s) 2023 MEREDA Index. Stephen’s comments on the Commercial Sector follow Economist Charles Colgan’s analysis for 2022.
The MEREDA Index is a measure of real estate activity designed to track changes in Maine’s real estate markets. The Index is a composite of nine seasonally adjusted measures reflecting both new development and transactions involving existing properties and it covers both the commercial and residential markets statewide. The most recent edition covers the year 2022 and provides commentary on the Commercial, Residential, and Construction sectors. The MEREDA Index for 2023 is 115.8
THE COMMERCIAL COMPONENT: 120.8
[Charles Colgan Analysis] “The components of the commercial Index all increased on an annual average basis compared with 2021, but all four components also ended the year below the end of year in 2021 calculated on a 4-quarter moving average basis. The index for the number of commercial real estate transactions reported in the Boulos database grew slightly on a year over year basis but the end of year index value was down 4.3%. Commercial square feet also declined in the latter part of the year, along with both the average sales price per square feet and the average lease rate.”
[Stephen Nahley, Chief Operating Officer & General Counsel, East Brown Cow] “In 2022, the commercial real estate industry in southern Maine experienced some exciting growth, particularly in Portland. As pandemic worries continued to ease, the region’s retail and dining sectors began to thrive once again, with new businesses opening throughout the city. As people recalibrated post-COVID and prioritized living in walkable communities with increased access to amenities, it translated into the trend of moving back into densely urban areas. East Brown Cow similarly recalibrated our portfolio in 2022 to gradually shift away from management of suburban spaces to reinvest capital into the urban fabric of Portland’s ever-vibrant downtown.
Although online shopping and a lack of labor pose risks for retail, recent lease transactions demonstrate the true strength of the local market. For example, East Brown Cow welcomed Madewell, a popular national retailer, to our property at 75 Market Street in November of 2022. Overlooking Post Office Park at the corner of Market and Middle Streets, this 5,532 square foot space is the company’s first store in northern New England. This transaction represented years of progress to curate Portland’s Old Port into a unique retail shopping destination, one that is successful for national retailers and independent businesses alike. For our team, this is the key for continued commercial growth.
Portland also experienced an increased interest in mixed-use spaces, another interesting trend. Visitors and residents are searching for amenity-rich spaces and developers sought to capitalize on the demand. At East Brown Cow, we saw this as an opportunity to expand our offerings at The Docent’s Collection, an alternative to traditional hotels that provides temporary luxury lodging within historic, mixed-use buildings in Portland’s Old Port. These properties combine retail or dining spaces on the ground floor with hospitality stays on the upper floors, providing a unique urban living experience. The success of this type of project can partly be attributed to downtown Portland’s growth in the commercial sector, as new dining and retail businesses look to leverage the increase in visitors to the Old Port.
Looking ahead, we remain optimistic about investment opportunities in urban, walkable areas across Maine. For example, in Portland our multimillion-dollar renovation of the Fore Street Garage continued in 2022, along with a project to repurpose One Canal Plaza’s first and ground floors into retail space. These projects are another sign of the strength of the area’s retail market, and we anticipate that the demand will continue to rise in the coming years.”