The Greater Bangor market for industrial, office and retail real estate is growing at a stable pace, with some exceptions.
Vacancies at the Bangor Mall, Kmart, the former Verizon call center and former University of Maine System building are dampening some of the growth figures, as is a shortage of industrial space, according to Bev Uhlenhake, a broker at Epstein Commercial Real Estate in Bangor.
“The Bangor market is generally healthy and stable for all types of real estate,” she said at the annual meeting of real estate group MEREDA in Portland on Jan. 18. About 900 real estate professionals attended the event.
“Exciting developments on the waterfront and downtown will continue to spur growth,” she said. “We’re starting to see expansion beyond Main Street, especially the development of the Nichols Block, plus the Hollywood Casino, Cross Insurance Center, Darling’s Waterfront Pavilion and the new Bangor Savings headquarters.”
She expects the redevelopment and repurposing of the troubled Bangor Mall to play out over the next few years.
Real estate is second to health care as a driver of the economy in Maine, MEREDA President Paul Peck said, referencing U.S. Bureau of Economic Analysi s state gross domestic product data. The MEREDA Index was at an all-time high at 96 out of 100. The index reflects the state’s commercial and residential real estate markets in the second and third quarters of 2017.
Tight industrial space hampers small business growth
Industrial real estate space is tight in Bangor, Hermon, Hampden and Brewer. The total existing space is about 7.4 million square feet, and that isn’t expanding much, which Uhlenhake characterized as typical.
Only 4.5 percent of industrial space is vacant, the lowest rate in a decade and down 10 percent since 2014, the last time Epstein’s brokers compiled data on the Greater Bangor market. Epstein’s data for 2017 is as of Oct. 31.
“The prices for leases don’t yet justify new construction. It’s a struggle,” she told the Bangor Daily News. ”Small businesses are the heart of the economy. If we don’t have room for them to grow and move, we are stifling them.”
She said tenants in the Bangor area are more price-sensitive than in the Portland market. Lease rates haven’t skyrocketed as they have around Portland and tenants aren’t buying on speculation without an immediate purpose for the property they purchase.
Southern Maine, including Greater Portland and Biddeford, is feeling the same pinch with industrial space, with the vacancy rate at only 1.25 percent, according to Justin Lamontagne, partner at NAI The Dunham Group. He described the situation as critical for craft brewers and marijuana growers.
“But it’s not just beer and weed taking up all the space,” he said, adding that e-commerce will drive the industrial market in 2018. “It is hampering our economic growth. We don’t have the space to put more companies in.”
But the average price per square foot of $60-65 per square foot in the Portland area is getting closer to the price that can support building new space, he said.
Bangor Mall, Kmart cast shadow on otherwise healthy retail market
Uhlenhake said there are significant vacancies in the retail market at the Bangor Mall and Kmart. The Macy’s store at the mall closed in the spring of 2017, and the Kmart on Hogan Road shut in mid-April of 2017.
“When you remove them, the overall vacancy rate around the mall is 5.8 percent, which is healthy,” she said. “Hopefully, that won’t be impacted by events at the mall.” The vacancy rate in the mall area was 7 percent in 2014, but she would not reveal the current rate including the mall.
The Bangor Mall area occupies almost half of the total existing retail space, with 3.17 million square feet of the total 6.38 million square feet.
Downtown Bangor, by comparison, has 432,220 square feet of retail space. The vacancy rate is 6.4 percent, compared with 12.3 percent in 2014, Uhlenhake said.
The numbers were compiled after the former Macy’s shut. A Miami real estate developer closed on its purchase of that store location on Jan. 16.
Uhlenhake said the Bangor Mall problems headlined most of 2017 and will do so again in 2018.
Mall owner Simon Property Group of Indianapolis defaulted on its $80 million loan against the mall, which soon may have a new owner.
A few buildings skew office space vacancies
About 9.7 percent of the office space in downtown Bangor is vacant, up from 8.6 percent in 2014. The majority of that is three buildings, including the former University of Maine System office, Uhlenhake said.
Bangor and Brewer have a total of 3.2 million square feet of existing office space, with 2.1 million square feet of that in Bangor.
In the suburban market outside downtown Bangor, the vacancy rate for office space is 9.3 percent, up from 3.9 percent in 2014. That’s due largely to vacancies in two buildings, one of them the former Verizon call center.
“That rate is extremely high. It’s typically 5 percent,” Uhlenhake said. “Without the two buildings it was 1.9 percent in 2017.” She declined to identify the second building.
She said downtown Bangor generally has a higher vacancy rate than suburban offices.
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