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Healthy Gains Forecast for Maine's Real Estate Market

PORTLAND, Maine - There's some positive news on Maine's real estate front today. As hundreds of industry professionals gathered in Portland today learned, Maine's property market is continuing its recovery from the recession lows of four or five years ago.

That's thanks, in large part, to a growth in commercial real estate. And the good times are set to continue.

The Maine Real Estate Development Association, or MEREDA, released its fall 2014 index Thursday at its annual forecast conference in Portland. Addressing the packed conference hall, MEREDA President Michael O'Reilly said the twice-yearly index, which tracks the overall health of the real estate industry, has risen a healthy 6.6 percent since the third quarter of 2013.

"This is a significant acceleration in the index from the spring of 2014, led by the commercial real estate sector whose index rose by 10 percent, compared with a year ago. This is the first time the commercial sector has led the index."

O'Reilly, who's also a senior vice president at Bangor Savings Bank, says the market is now up 16 percent since its low point in the fall of 2010 - though it's still 20 percent down from the highs of 2006.

All of us in the real estate industry are very, very busy," O'Reilly says. "We've seen a lot of development."

He says much of last year's growth was driven by the hospitality industry and an increase in senior housing projects throughout the state. Gains in the residential sector were a little more modest - about 3.5 percent - while construction employment remains essentially flat. But O'Reilly says this is partly due to a labor shortage.

"Construction employment is one of the primary drivers, and it had been in the past," he says, "but if you get to a point where you can't find any more employees, we need to sort of incorporate that into how the overall index runs."

"If there's one thing you walk away from today from my presentation, check this one out," says Darren Hebold. Hebold, who is with LUX Realty Group, is talking about the health of the "vacation-slash-hospitality" sector. He quotes from a recent national forecast for 2015.

"Demand for U.S. lodging will have increased 25 percent since the depths of the 2009 recession, whereas supply will only have increased about 6 percent. Think about that for a moment."

That's demand outstripping supply by four to one, says Hebold, making the Maine economy well-placed to handle the extra 900 hotel rooms which are forecast to come online this year.

Michael Dolega is a senior economist with TD Bank. He says low mortage rates, along with low fuel prices, will likely add up to continued growth in Maine's property market in the coming year, although probably not at the levels seen in 2014. "Somewhere to the 5 percent growth, I think, is going to be quite sustainable going forward for the region," he says.

For MEREDA President Michael O'Reilly, the key issue for 2015 will be in commercial development. "There's still not a lot of demand for someone to go out and build speculative commercial property, or speculative retail property," he says, "so that's going to be the trigger."

O'Reilly says most Maine property is built to order: that is, safe in the knowledge that it will be occupied. But, as vacancy rates continue to get lower, he wonders if this will be the year the so-called "Field of Dreams" approach will apply: "Build it and they will come."