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Commercial real estate insiders sort through “mixed messages” as the Maine Real Estate & Development Association unveils MEREDA Index

Index meant to measure pulse of Maine’s commercial real estate industry

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The Maine Real Estate & Development Association (MEREDA) welcomed members and guests in late January for its annual Real Estate Forecast Conference in Portland, and unveiled what the group has coined as the “MEREDA Index,” a metric that will illustrate the statistical changes and measure the pulse of the commercial real estate industry in Maine, including sale and lease activity, construction starts and other data – for the first time ever, aggregated into one figure as an indicator of this important sector of Maine’s economy.

The Maine Real Estate & Development Association (MEREDA) welcomed members and guests in late January for its annual Real Estate Forecast Conference in Portland, and unveiled what the group has coined as the “MEREDA Index,” a metric that will illustrate the statistical changes and measure the pulse of the commercial real estate industry in Maine, including sale and lease activity, construction starts and other data – for the first time ever, aggregated into one figure as an indicator of this important sector of Maine’s economy.

MEREDA board president, Drew Sigfridson of CBRE | The Boulos Company, welcomed the standing room only crowd comprised of brokers, architects, developers, engineers, bankers, and economic development professionals, the vast majority of whom expressed optimism about Maine’s real estate economy in an informal show of hands.  But, Sigfridson warned, there are “confusing messages out there as to whether Maine is headed to a real estate rebound or not.  That is why the MEREDA Index will serve as an important indicator of Maine’s real estate economy, and an important barometer of confidence in the market.”

Dr. Charles Colgan from USM’s Edmund S. Muskie School of Public Service developed what he calls the “beta version” of the MEREDA Index.  Colgan spoke with caution, noting that current benchmark figures which would typically indicate growth in the real estate economy are on the rise, but still at lows compared to the height of the 2006 economy. 

This includes construction employment, housing permit applications, median home prices, sales of existing homes, and commercial sales.  “Housing sales are increasing, but barely,” said Colgan.  “Maine’s recovery is not likely to be as large as the country’s, relative to the pre-recession peak,” he continued.

“We have definitely seen more activity and more people interested in doing something,” noted Sigfridson.  “The MEREDA Index notes a steady uptick in activity from the bottom of the recession, which would indicate that now is the time to get into the market if possible.”

Brian Whitney of Maine’s Department of Economic and Community Development joined the conversation, serving as event keynote.  He acknowledged the importance of the real estate industry in Maine, and offered the Department’s assistance to all of those in attendance, as they work to put together deals and/or navigate the bureaucracy.

Also stepping to the podium were leading experts from across Maine, who offered forecasts of what lies ahead for particular segments of Maine’s real estate economy, including projections by region and key market sectors, such as office, retail, and industrial.  Many of these industry-insiders seemed to agree with the MEREDA Index’s assessment: the real estate economy is improving, slowly.

It was perhaps Mark Malone of Malone Commercial Brokers who said it best, noting that it has been a “year of mixed signals and messages.”  He expressed a level of optimism though, as he reported that retail vacancy rates have slowly decreased from the highs of 2009.  Malone noted that, in the grocery market, competition between Market Basket, Super WalMart, various dollar stores, Shaw’s, and smaller boutique markets has heated up.  Additionally, Malone pointed out the increased development of gyms and other fitness facilities, and projected “slow but steady new construction gains in prime markets.” 

All speakers expressed optimism, noting great financing options and competitive pricing.  “The future is now,” said Malone.  And, based on anecdotal trends and the small statistical upticks as displayed in the MEREDA Index, he might be right.

According to Sigfridson and his colleague Tony McDonald, CBRE | The Boulos Company’s 2013 Office Market Survey (www.boulosofficemarketsurvey.com) indicates that there has been “[r]elatively slow growth year-by-year, but significant changes and growth over [the] ten year period,” and that growth is most significant around new transportation corridors and interchanges.

“Transportation drives real estate development,” said McDonald.  He predicts future demand for urban development sites as mixed-use, more competition and demand for residential rather than office uses, and continued, gradual improvement in downtown occupancy levels  McDonald predicts extensive reuse of existing inventory, predicting “limited new construction other than specialized, build-to-suits and medical offices.”

“The urban market is doing well, though there are still some struggles in the suburban market,” noted Sigfridson.  “We will see increased vacancy there due to limited demand for a bit longer.”

From an industrial perspective, overall vacancy rates in Southern Maine dipped to 6.97% due in part to dropping lease rates, according to Justin Lamontagne of NAI The Dunham Group.  “The momentum from 2012 will slow but not stop,” said Lamontagne.  “Bullish owner/users continue to benefit from historically rare opportunities.”

Colgan’s comments seemed to echo this sentiment, noting that the MEREDA Index takes into account the employment trends over the decade, indicating that “important changes [are] ahead in commercial real estate.”

“We expect the MEREDA Index to be a great tool for commercial brokers, lenders, and others to gauge the level of enthusiasm in the market,” said Sigfridson.  “For instance, even this beta version shows that the real estate industry has already hit bottom, and has leveled out; that’s an important message for us to have, and for us to communicate to those looking to get into the market.”

The MEREDA Index will be further developed and finalized by Colgan in the months to come, and the first official non-beta Index number will be announced at MEREDA’s upcoming spring conference, schedule for May 2013. 

Additionally, MEREDA’s spring conference will focus on the reuse and revitalization of parking lots in urban areas, as well as the maximization and development of older style suburban developments. 

About the Maine Real Estate & Development Association (MEREDA)

MEREDA is a nonprofit entity whose members banded together in 1985 to present the views of the state’s real estate industry to lawmakers in Augusta. Today, MEREDA’s more than 200 members firms are primarily from the commercial real estate industry and employ thousands of Maine citizens and drive a huge percentage of Maine’s economic activity.  The organization aims to promote fair and responsible development and ownership of real estate throughout the State of Maine.  Additional information about the MEREDA, the MEREDA Index, and the upcoming MEREDA spring conference is available at www.mereda.org.