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June 27, 2011
Commercial tenants taking control
Portland's high vacancy rate has landlords making concessions and changing how they
fill big spaces.
By Edward D. Murphy [email protected]
Staff Writer
PORTLAND - In a market where one out of every eight square feet of commercial space is vacant, the power during
rental negotiations has clearly shifted from landlords to tenants.
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And some tenants are using that newfound power to swing some good deals.
"It's definitely a tenants' market," said Jim Harnden at Malone Commercial Brokers.
For instance, the Portland Regional Chamber recently signed a lease to move from Pearl Street, on the edge of the Old
Port, to 443 Congress St., right across from Monument Square.
The move will give the chamber a more visible location, the building's whole first floor and savings on rent of about
$30,000 a year, said Godfrey Wood, the organization's chief executive officer.
In addition, the landlord, JJR 443 Congress, agreed to essentially demolish the interior space and build it to the
chamber's specifications.
"We like the visibility and member access" of the new location, Wood said.
Others have announced moves in recent months. The law firm Pierce Atwood, for instance, will be moving from One
Monument Square to a new headquarters building being fashioned from the old Cumberland Cold Storage Building on
the waterfront, a move facilitated by a big property tax break from the city to the developer, Waterfront Maine.
Late last year, MaineHealth purchased 110 Free St., consolidating operations from three different leased locations
around the city.
But despite some moves, vacancies remain stubbornly high, particularly along the stretch where the chamber is headed
and which Pierce Atwood is departing.
The building the chamber is moving to is an exception, said Josh Benthien, one of three partners who bought the
building in February.
At the time of the transaction, Benthien said, the building was more than half empty. But that kept the price low enough
to give the new owners some flexibility on lease rates, he said.
"We were able to buy it at a price where we could be competitive with our rent and we're in it for the long haul," he said.
"I kind of like the creativity of putting a deal together," Benthien said, noting that the owners were able to obtain a 10year lease with the chamber.
Flexibility and creativity are the hallmarks of any commercial landlord who is able to bring in a new tenant at a time when
citywide vacancy rates are above 12 percent, Harnden said.
He said most companies believe the market is about as soft as it's going to get, so if they want to move -- either to a
bigger space or simply a better address -- business owners are likely to do so soon.
"They feel as though we're at the bottom and there won't be another shoe dropping" to send rents any lower, he said.
"It's an opportunity to take advantage of the situation and lock into some attractive terms." That situation doesn't come
often in Portland, Harnden noted.
He said larger markets are often more volatile, and it's not uncommon for rates to move, up or down, 10 percent or more
a year. Portland, by contrast, rarely sees lease rates change more than a few percentage points a year.
"For the first time, landlords have been cutting deals," said Joseph Porta with CBRE/The Boulos Company. Tenants "are
using their leverage to get better space and control their overhead, long term."
Both Porta and Harnden said some companies see that as something they can achieve more easily off of the Portland
peninsula.
One key factor is parking, which runs about $100 a month per space in downtown Portland. So a company with 50
employees is looking at an additional expense of $60,000 a year.
"It's a cost that needs to be picked up," said Harnden, but off-peninsula and in suburban office parks, parking is typically
free, they said.
Issues like that, Porta said, are causing some tenants to look outside Portland when it comes time to move.
So some larger tenants are moving out, and landlords are having to fill big spaces with a number of smaller tenants.
"Congress Street is in transition from a place with the top rents and Class A buildings to a place with smaller tenants,
one floor only," Porta said. "It will depend on the creativity of the landlord. That creativity will be the key to filling spaces."
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Staff Writer Edward D. Murphy can be contacted at 791-6465 or at:
[email protected]
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PortlandOldtimer 10 months ago
It is time the city face the fact that the concept of a Creative Economy is a bust. Galleries along Congress do not
build retail traffic. The number of days a week and the hours they are open is limited. The only except is one day a
month on First Friday. The Creative Economy boosters claim that they have brought in 63,000 jobs but the fact is
that most them of them are low paid kitchen workers since they count every hamburger stand as Creative Economy.
Renys, a real department store, draws retail traffic and that is what we need. We never needed an "Artist Colony"
in the 600 block of Congress. As to blocking off the street, look at 3rd Street Santa Monica. Fill the space with real
retail locations where people shop and they will come. The Creative Economy is a fantasy of a small group of West
and East Enders who have delusions of grandeur. Portland needs real jobs and real shoppers for real people.
captainconfrontation and 7 more liked this
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danheskett 10 months ago in reply to PortlandOldtimer
For many who live outside the city or inside Portland but outside of the downtown area, no amount of shopping
will make up for the inconveince of venturing into Portland!
1 person liked this.
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tomuchbs 10 months ago
"They feel as though we're at the bottom" dreram on.
Porkland has become a slum city, stores are gone, druggies and bums roams the streets all day and night. A few
overpriced trendy resturants for the well healed suburbanites does not a city make. Portland draws down almost 45
percent of the entire states welfare budget according to the Maine state web site. Socail services seem to be the only
viable ongoing business and judging from the lines outside the welfare office I'd say business is booming. The cost of
maintaing services will spiral upward until the taxpayers revolt against the city and demand change. Until them
portland will suffer the slow economic decline it so rightfully deserves.
taxpayer1958 and 2 more liked this
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captainconfrontation 10 months ago in reply to tomuchbs
I don't know that Portland is a slum city or that it deserves to suffer a slow economic decline. Do you even live
here? It's no secret that Maine is suffering. Cheering for economic and social decline of it's largest city seems,
well... odd.
_Kingster_ and 6 more liked this
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tomuchbs 10 months ago in reply to captainconfrontation
the economic decline is the result of continous bad, rather terrible, business and planning decisions. Like
people that have an undiagnoised disease, pain (not business as usual) is what motivates them to seek
help. So it will be with the businesses and landlords in porkland.
The social experiment is well over and it failed. Now Portland has to face the reality of what the welfare
land mentality has done to their once viable community. Look around, even the newly arrived immigrants
will tell you they come to Maine for the social services that we hand out like candy on halloween. Cant
blame um, its free taxpayer money that our dems have been handing out for the last 20 years that has
attracted the free loader set. This will get worse before portland is cleaned up enough to be attractive to
any real business again.
1 person liked this.
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captainconfrontation 10 months ago in reply to tomuchbs
Again: Do you live in Portland? If not, can we send the riffraff to your town?
Also: You've talked to these immigrants personally, or does it feel like that's what they'd say?
1 person liked this.
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taxpayer1958 10 months ago in reply to tomuchbs
Agreed. Maybe if the city stopped handing money out, like rent vouchers to people who normally couldn't afford
to live here, and put it into more police services and cleaning the place up; read as, quality of life issues, people
would be more inclined to have a positive attitude about working in town. It must be really great to bring a client
in town and drive up Congress with garbage all over the place, people drinking in public and if you're really
lucky, you'll be approached for a hand out. "Lovely place you've got here."
2 people liked this.
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sharon hansen 10 months ago
Oh boo-hoo, builders and speculators. Greed sometimes gets the better of us doesn't it.
2 people liked this.
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Mark Usinger 10 months ago
Commercial spaces continue to have "stubbornly high" vacancy rates, the Thompson Point folks aren't going to make
any money on the convention center they plan to build (by their own admission), nor do they make any money on the
Red Claws (by their own admission), and Portland hotels have high off season vacancy rates even BEFORE these
folks build their hotel. Huh? I'm not that smart, but even I can read the writing on the wall. Just wait until Portland
loses the rent money they are getting for the Red Claws playing at the Expo, and the whole thing collapses like a
deck of cards. Won't the city look wicked clever!
1 person liked this.
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Guest 10 months ago
I still find it amazing that many landlords would rather let a space sit vacant for years rather than take anything less
than their asking price. HEY LANDLORDS: You're losing more money when you're not collecting rent, and you're not
doing yourself, the economy, or the community your property is in any favors with vacant space.
1 person liked this.
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danheskett 10 months ago in reply to Guest
Sometimes you have to take the long view. When times get better it is difficult to simply dislodge a tenant and
replace with a better tenant. Leaving it vacant now preserves future opportunity. Business people write many
books, develop complex formulas, and debate endless about how to measure and recognize opportunity cost.
1 person liked this.
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captainconfrontation 10 months ago
Wondering if there will be legislation passed to protect commercial property owners similar to those residential
lessors now enjoy.
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Jake_007 10 months ago
If you think ""Congress Street is in transition" now with it becoming a retail skid row,wait till it gets closed to traffic
except buses and bicycles.
Imagine the skateboarders weaving in and out with that advailable roadway.
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Slytoon 10 months ago in reply to Jake_007
It'll be awesome.
Jollydodger liked this
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SScanlonREMAX 10 months ago
From Twitter
Commercial tenants taking control | The Portland Press Herald / Maine Sunday Telegram: http://t.co/PHwTPIS via
@addthis
PortlandChamber 10 months ago
From Twitter
@PressHerald article about commercial real estate in Portland, w/ a mention of the Chamber's move to Congress
Street. http://t.co/besT7ZP
johnbripley 10 months ago
From Twitter
One more retweet from ericbeauregard
RT @PressHerald: High vacancy rate forcing Portland's commercial landlords to do more to woo, keep tenants.
http://bit.ly/m7vasJ
PressHerald 10 months ago
From Twitter
High vacancy rate forcing Portland's commercial landlords to do more to woo, keep tenants. http://bit.ly/m7vasJ
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