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January 13, 2021

Hot industrial market takes on different look in central Maine

a gray one story industrial buiding with a glassed-in retail area and a bunch of truck bays Photo / Maureen Milliken The industrial building at 46 Leighton Road in Augusta, a part of which was recently leased to Playsite Services New England, represents the hot central Maine industrial market.

There's nothing about the industrial building on Leighton Road in Augusta that would set it apart from the many others, big and small, that line the two-lane road in the once rural west end of the city. But the property is a peach in the region's strong industrial market.

The Augusta area industrial market, like the rest of southern and central Maine, is hot and not cooling off any time soon. But the regional market, as well as the one to the west in Lewiston-Auburn, isn't driven by businesses that can't find what they want to the south. Instead, the demand stems from unique regional needs.

State government space requirements, some related to the COVID-19 response, are big Augusta industrial drivers. In Lewiston, the New England Clean Energy Connect powerline corridor is still in early stages but has attracted action. Local businesses that are outgrowing their current digs in both regions are also driving demand.

"Anything that's got an industrial component to it" is in demand, Nick Lucas, a Boulos Co. broker, told Mainebiz Wednesday.

In the case of the 46 Leighton Road building in Augusta, Playsite Services New England, which builds home playground sets, has outgrown space because of the high demand for its product. The local company has boomed with the pandemic, not only in Maine, but beyond, Lucas said.

Playsite, owned by Raymond Moody, recently leased 3,000 square feet that was previously used by the J.J. Nissen Bakery Thrift Store. It fit the bill with big loading docks, a location that's accessible to much of the state and easy access to Exit 109 of Interstate 95.

The 8,000-square-foot building is owned by J&R Associates Inc. and Augusta commercial and residential property developer Jason Gall. The rest of the space in the building is used by Gall's maintenance crews.

Up the road, on Anthony Avenue, the state government recently leased warehouse space to store PPP and other equipment related to the COVID-19 response, one of more than half a dozen industrial properties in the Leighton Road area the state owns or leases.

Lucas was also one of the brokers when Sargent Electric leased a 13,000-square-foot warehouse at 45 Alfred Plourde Drive in Lewiston in November. The company is working on the NECEC project, with connects with a Lewiston power station.

Lucas said while there may be some overflow from the hot Portland-area market to Lewiston, a lot of the central Maine action is because that's where the businesses want to be.

In the case of Sargent Electric, "They wanted to be in Lewiston," Lucas said. "It's accessible to a lot of their business."

Other brokers on the lease were Chris Paszyc, of Boulos, and Brandon Mitchell, of Malone Commercial Brokers.

a classroom with small tables laminate floors and bright walls
Courtesy / Creative Beginnings
Creative Beginnings, which moved into new-build warehouse space at 2401 Broadway in South Portland, is making the most of the high ceilings and open space at its new site, one of the nontraditional uses in the hot industrial market.

Southern Maine industrial 'projects stronger'

South of Augusta and Lewiston, the industrial market not only remains hot, but will likely get hotter, brokers said, as businesses look for immediately available wide-open, flexible space.

"The industrial market proved resilient in 2020, in spite of the great challenges we all faced," Justin Lamontagne, of NAI The Dunham Group, said. "In fact, the sector projects stronger than ever, largely because of the challenges the pandemic has wrought."

He said sales demand is as strong as he's seen in his career, and the need is immediate, which drives up prices. "It’s largely because investors looking for cash flow, or potential cash flow, are often competing and outbidding end-user industrial businesses."

He said this year "should be a vibrant year in the industrial sector " as inventory is added, though slowly, and demand remains from a variety of industrial end-users, "many growing in direct response to pandemic related conditions."

High ceilings, ability to add automation and easy access are just a few of the factors that make industrial space enticing, perhaps even more so during a pandemic.

Danielle Lape, of KRE Brokerage Group, told Mainebiz, "Some companies are contemplating partial closures and considering automation technologies if employees are unable or unwilling to return to work, but those automated systems will still need a roof over their head."

She said warehouse layouts and 22-foot ceilings, for instance, offer a lot of room to make adjustments. Lape was the broker when Creative Beginnings day care center in South Portland moved from Gorham into 12,000 square feet of light industrial space at 2401 Broadway. The move allowed the day care center to expand, with plenty of room for social distancing.

The day care center is in the second new build on the 9.8-acre site by developer Rob Plummer, who's slowly building out the space as he acquires tenants. He plans to add 10,000 square feet onto the building, and add another 25,000-square-foot one, aimed at light industrial tenants. Heavy Machines Inc. is in a 6,000-square-foot new build on the site.

Lamontagne said that while there are a lot of nontraditional users like Creative Beginnings looking for space, the tight market still favors traditional users.

"Landlords have the luxury of being very particular on who rents their space," he said. He said often owners will take a pass on leasing to a fitness center, cannabis business or day care center in favor of one that has less traffic, and therefore less wear and tear.

Adding inventory is slow going

Adding inventory is the industrial market's biggest challenge. With a variety of users looking for large utilitarian space, there's just not enough to go around. The overall southern Maine vacancy rate has hovered at or near 3% for the last 24 months, Lamontagne said.

Lack of new construction adds to the inventory drought.

Jim Dinkle, executive director of FirstPark, in Oakland, recently told Mainebiz the high absorption rate for industrial buildings in the Augusta-Waterville area makes the need for more speculative construction clear.

"If they built them, they would be sold. They will come," Dinkle said. There are 10 lots available to be developed on the 285-campus just off Interstate 95 on the Waterville-Oakland line.

Lamontagne said that new construction is picking up but businesses looking for space want it now and don't want to wait through the slow process of ground-up development. "It can't keep pace with immediate demand," he said.

Lamontagne said that speculative development isn't much of a factor in the southern Maine market, despite demand for space.

"At least two are owner/user-lead buildings designed with excess vacancy on the expectation they’ll lease up during construction," he said. 

Lucas said that in central Maine, spec development isn't happening. 

"It's challenging for a developer to build a speculative building without a tenant lined up," he said. "There are places in Augusta, a number of places, where someone could, but if you don't end up with a tenant, you're stuck with a building."

If someone were to build a spec building, though, there's a specific model that would work.

"A standard warehouse that offers yard space for trucks to pull in and out, in the 10,000 to 20,000 square foot range," Lucas said. "Those are hard to come by."

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