Hundreds of real estate professionals are in Portland Thursday for the annual Maine Real Estate and Development Association Forecast conference.
Morning Edition host Irwin Gratz talked with the Association's President, Craig Young, a broker at the Boulos Co., and Shannon Richards, the vice president and founder of the construction firm Hay Runner, about trends in real estate development.
Young says while commercial development has slowed, new housing projects are being built, especially in southern Maine.
This interview has been edited for clarity.
Young: What's driving development in Maine is new population growth, people coming into the southern part of the state. It started during COVID. And I think it continues. If that continues, I think you'll continue to see development.
Richards: When you're talking about developing, there's different aspects. There's new development, there's new population coming to the state, but then there's also the existing population. They're graduating from a working part of the population to a retired part of the population. And so there's different aspects to development.
Gratz: Craig, when we talked last year, you were still expecting more interest rate hikes. And of course, we did get those. How did that affect development efforts in the last year?
Young: Well, it has slowed it down. And I think you see a lot of stuff that's being built now really was approved and probably financed a year or so ago.
Richards: That's right.
Young: And so you get this lag of development. I think it really matters what happens over the next six months. Rates are expected to come down just a little. But I think that expectation of easing will help.
Gratz: Shannon, as someone who runs a construction company, I'm just curious to ask you about finding skilled tradespeople.
Richards: It's a consistent problem. It's one of, I would say, our greatest barriers. If you read about this, you're going to see that it's going to continue to get worse before it gets better. And I'm not seeing anything to contradict that prediction.
Young: I will add, while I think there's an issue with labor workers and all of that, we have seen an easing of that. The large construction companies are looking for work, they don't have as much construction in the pipeline as they used to. It hasn't really affected pricing, yet -- it's still expensive for new construction or renovations. I'm not sure there's more skilled labor, but there isn't as much of a demand as there was, say, 18 months ago.
Richards: Well, and the tricky part is that commercial construction is very different from residential construction, and the workers are very different. So you may see reduction in commercial projects out there. But that doesn't necessarily translate to an improvement in our ability to find the resources that we need in the field for residential.
Gratz: Craig, you touched on this at the beginning, but I'd like you to perhaps go into a little more detail about how the office market is.
Young: When we look at it, there are a lot of national trends that don't necessarily relate to Maine. Smaller companies like my firm, Shannon's firm, most people are back in the office most of the time. They may have a day or two here and there where they work from home. But largely, they're back in the office. And that's true through most of Greater Portland. There's always exceptions. The harder part are the larger companies, like Unum and WEX and IDEXX where it's hard to get some of those folks back. And while companies have drawn these red lines in the sand, they can't do anything about it. You can't sort of fire a workforce, there's no one else to hire, there'd be a lot of other backlash. On the other side of it, you have a number of buildings that have been vacated and now are being turned into something else. Residential is the most notable. You're seeing it really right here in downtown Portland at both 465 Congress St. and 477 Congress St. We've not really seen the same in the retail or in the industrial sector. The industrial sector is very hot, a lot of demand, not a lot of vacancy, whereas retail is kind of just holding its own.
Gratz: Talk to me a little bit about industrial. Why is that so hot?
Young: Look at the transformation down on Marginal Way, and you have a lot of breweries there. And across the state, they've taken a lot of that industrial market. In addition to that you have the cannabis industry, which is taking large industrial facilities. And there's a lot of them out there now, I don't think the average person realizes how much cannabis is been grown out there.
Gratz: Shannon, we talked about finding enough tradespeople to work in the housing sector. We're still in a place where there seems to be a lot of housing demand that can't be fulfilled. What's holding it back.
Richards: I think a lot of it's financing and getting your cash flow. So what people can afford to pay as the end occupant, whether it's renting or buying. We're not going to I think reach demand unless we use subsidies and we use programs.