Greater Portland Market
Mid-Year 2020 is like no other time in history for the Greater Portland office market. The coronavirus has affected everyone at some level. It has caused some deals to fall through or at least be put on hold and some deals to be accelerated. There is market uncertainty. Decision makers, may they be company CEOs or investors do not like uncertainty, and therefore have either chosen to pursue short term renewals or wait on the sidelines to see how things unfold. Most of the firms that are willing to consider longer lease terms have either benefited from these market conditions or are downsizing therefore improving their financial situation.
The virus has impacted overall deal volume, which decreased by 18% from Q2 last year. The lowest second quarter volume since 2009 and early indicators are that the third quarter will see a similar trend. It is too early to tell if COVID-19 has impacted vacancy rates. Vacancy rates have increased in all sectors; however, this is due to market movements that were in motion prior to the virus’s detection. At mid-year, the overall vacancy rate for Downtown and Suburban combined Class A & B stood at 9.4%, an increase of 1.4% over year-end 2019 and 2.5% above the 5-year average. The second year in a row overall vacancy has increased.
Downtown’s combined Class A & B overall vacancy rate is 8.1%, up from 6.5% at year-end 2019. Major contributors to this increase were Berry Dunn offering 38,000 SF for sublease at 100 Middle Street due to their upcoming relocation to 87,000 SF at 2211 Congress St. In addition, TD Bank has renewed and downsized by 20,000 SF at One Portland Square and KeyBank renewed and downsized by 14,000 SF at One Canal Plaza. However, there were several large deals including Northeastern University who leased 20,000 SF at WEX’s second building Downtown at 100 Fore Street, Certify leased 53,000 SF in the former PayPower building at 320 Cumberland Avenue and Atlantic Fund renewed at Three Canal for 20,000 SF.
The Suburban combined Class A & B overall rate is 10.45%, up from 9.2% at year-end 2019. This is the highest overall Suburban vacancy rate since 2012. There continues to be a number of large vacancies in both Class A & B spaces. The most significant new availabilities since year-end 2019 are 104,000 SF at 2 Gannett Drive (Blue Cross/Blue Shield Building). BC/BS has not been fully utilizing the space and therefore decided to offer the space for lease. Additionally, 27,000 SF at 340 County Road when Husson University vacated and HNTB will be vacating in January 2021. On the absorption side, as mentioned Berry Dunn is relocating to 87,000 SF at 2211 Congress Street, HNTB took 15,000 SF at 82 Running Hill Road and Pika Energy took 15,250 SF at 53 Darling Avenue.
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