Southern Maine's superheated real estate market is presenting challenges to first-time homebuyers and expanding businesses, but shows no signs of cooling off.
The median home price in Cumberland and York counties hit $312,000 last year, a record high, and available homes sold quickly, staying on the market just 15 days.
The purchase price of industrial space jumped to the highest point since 2011 and prohibitively high construction prices prevented companies from investing in new buildings.
"There has to be some sort of global market slowdown, because we are not building our way out of this," said Brit Vitalius, Principal of Vitalius Real Estate Group in Portland.
More than 900 real estate professionals gathered in Portland Thursday for the annual forecasting conference of the Maine Real Estate and Development Association.
Scarce manufacturing, warehouse and industrial space in Southern Maine has created a crunch for businesses, said Justin Lamontagne, partner and designated broker at Portland-based NAI The Dunham Group.
"We do not have enough infrastructure, and not enough commercial space, for a company to do what they need to grow and create jobs," he said.
The vacancy rate for industrial space across seven communities around Portland ranges from a low of 0% in Gorham to slightly over 5% in Biddeford, according to Lamontagne. That pattern is the same across Southern Maine, he said.
Purchase prices for warehouse and manufacturing properties have soared, rising to an average of $70 per square foot in 2019, a 75% increase from 2011. Industrial ease rates also have increased significantly, especially for properties in highly sought-after areas, Lamontagne said.
Businesses such as craft breweries, fitness centers, food producers and marijuana growers looking to buy or lease their ideal space — often 2,000 to 3,000 square feet with a loading dock and access to the highway — are often disappointed, he said.
"It exists, but it is all full — that's no joke," Lamontagne said.
High prices dominate Portland's residential apartment market, too, said Vitalius. The average purchase price for three- to four-unit apartment buildings dropped slightly but is still higher than it was 10 years ago, with the current average ranging from $555,000 to $612,000.
Prices for apartment complexes with more than five units surged, however, with an average of $144,000 per unit — almost double the cost five years ago, Vitalius said.
"That's pretty shocking, that's hard to keep up with," he said.
Portland rents have stayed high, but stable, at around $1,450 for a mid-range, heated two-bedroom, slightly higher than last year. While Portland rents have gone up sharply in recent years, the housing stock has been improved and renters appear to be willing to pay more for nicer apartments, Vitalius said.
A major new area of growth has been the Saco-Biddeford area, where young people are willing to pay high rents — $1,400 to $1,800 a month — to live in an up-and-coming community, Vitalius added.
"This is not discount — this is a new place people want to be," he said.
The median sale price for a single-family home in Maine climbed to $225,000 last year, an all-time high and 16% higher than the previous peak in 2007, before the housing market collapse, said Dava Davin, CEO of Portside Real Estate Group in Falmouth.
But sales last year were flat because of scarce inventory, especially for midrange homes, she said. The annual springtime buying frenzy was on again last year. Homes in York County were on the market for just 18 days on average, compared to 54 days five years ago, Davin said.
"Days on market are just plummeting," she said.
Millennial buyers and seniors looking to downsize are both looking for the same small, efficient properties in walkable neighborhoods near amenities, Davin said. That constricts the inventory and leads to high prices with multiple offers. Davin doesn't see that changing this year.
"Buyers have to be prepared for a little heartbreak," she said.
But seasonality in the market might help some prospective buyers. There was a $65,000 price difference for homes in Cumberland County between January and June, which means if buyers wait for the right time, they have more bargaining power in a strong seller's market, Davin said.
The strong real estate market presents challenges for business expansion in the state because of scarce commercial space, but also a lack of affordable housing needed to grow the workforce, said MEREDA Board President Gary Vogel.
"Where economic growth is the greatest is where construction costs and real estate prices are the highest," Vogel said. "I don't think Maine is unique in that regard."
