Why So Many Businesses Are Leaving Maine

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Vacancy Rates Remain Low Despite Slight Recovery

PORTLAND, Maine — As Maine's industrial real estate market continues to experience unprecedented tightness, some big businesses are being forced to expand or relocate out of state due to the lack of suitable space. Justin Lamontagne, a commercial broker with the Dunham Group, has personally represented two such companies in the last three years that have shifted their growth to the Midwest, declining to name them.

Demand Outstrips Supply in Greater Portland

The industrial market vacancy rates in Maine hit a record low in 2023 and have only slightly recovered, now sitting just above 2 percent. In Greater Portland, where demand is highest, the vacancy rate remains below 1 percent. Within a 10-mile radius of the city, there are more than 19 million square feet of industrial space, yet only 131,000 square feet are available.

"This is a striking fact and… simply bad for business in the Portland area," Lamontagne wrote in his group’s mid-year market report, published last week.

Impact on Large Businesses

The scarcity of space particularly affects larger businesses seeking 100,000 square feet or more, about half the size of a typical Walmart superstore. The prohibitively high costs of new land and construction—mirroring the residential market—are forcing Lamontagne’s clients to choose between obsolete spaces or those in less accessible rural areas if they remain in Maine. Often, these businesses are opting to move out of state.

Economic Concerns

Industry insiders like Lamontagne are concerned not only about the immediate impact but also about the slowing demand and “overall call volume.” Lamontagne attributes this to the rising interest rate environment and inflation that has finally caught up to industrial users.

Cooling Effects in the Residential Market

Real estate agents in Maine’s residential market are also noticing a leveling off. High interest rates, waning demand since the COVID-19 pandemic brought a wave of in-migration to Maine, and added supply mean that homes are now sitting on the market for longer, with some sale prices being slashed.

However, in both residential and industrial markets, this “cooling” effect is only relative to the last four years. The market remains historically supercharged, and there’s still not nearly enough inventory in Maine to keep pace with demand from businesses.

Missed Opportunities

“We saw a steady increase in industrial supply from 2019 to 2022, but I don’t think it was enough,” Lamontagne said. “And with construction costs as high as ever and development timing still comparatively slow, I am concerned we have missed our opportunity to really make a dent in the supply/demand imbalance.”

Attribution source: Bangordailynews.com