Processing Your Payment

Please do not leave this page until complete. This can take a few moments.

Updated: April 20, 2020 Focus on Real Estate / Construction / Engineering

Real estate realities: Pre-pandemic deals advance, but future is uncertain

Photo / Tim Greenway New real estate inquiries are slowing, says NAI The Dunham Group partner Tom Moulton. Shortly before the COVID-19 emergency, he was one of the brokers on the $18.1 million transaction of 600 Sable Oaks Drive in South Portland, seen here.

The commercial and residential real estate markets have been hot over the past year.

Investors and owner-occupants have gone after new opportunities from southern Maine to Bangor and beyond. Top prices have topped $20 million. Home sales trended ever upward in volume and price.

Now the effects of the pandemic and stock market turmoil are already being seen. Deals in the works before the emergency are still largely moving forward, according to brokers. But new inquiries are a mixed bag.

“People are laying low,” says Tom Moulton, a partner at NAI The Dunham Group in Portland.

Among his recent deals, Moulton helped broker one of the year’s larger transactions, Atlantic Federal Credit Union’s $18.1 million purchase of a Class A office building in South Portland, which finalized in early February.

Since then, most deals he was working on before the shutdown are still moving forward.

“People are trying to focus on the big picture, not worry about minor considerations: Just get the deal done,” he says. “But I don’t see a lot of new tenants or new buyers actively looking at the market. One deal that I was starting to work on basically got put on hold indefinitely, and might or might not ever come to fruition. People are very cautious about what the future holds.”

Electronic meetings

In her March 24 emergency declaration, Gov. Janet Mills included real estate as an “essential business.” The industry is still working, although primarily from home.

“While real estate is still deemed ‘essential,’ we are taking the state and local municipal orders and public health advisories seriously,” says Chris Paszyc, a broker and partner with the Boulos Co. in Portland. “As a company, we have closed the physical office, and are now communicating virtually. Zoom, Slack, email, telephone, Facetime, Microsoft Meetings, social media — all electronic mediums are being utilized amongst my colleagues to share information and make decisions. We are no longer conducting face-to-face meetings or property tours with clients.”

As an alternative, he says, the company is arranging for non-occupied properties to be opened if it is absolutely essential.

“If the property is occupied, we are asking the tenant or buyer to tour virtually via Facetime or Zoom, or to wait until restrictions are lifted and risks of disease spread subside,” he says. “Our client’s, employee’s and general public’s health is of the utmost importance right now.”

Local and national buyers are still active, eyeing low interest rates. “The company has seen an uptick of interest in the industrial, warehouse and logistics sectors,” Paszyc says.

Paszyc and his partner Nick Lucas launched marketing for a 29-unit residential investment property in March; it garnered strong interest. Boulos had major sale closings and lease signings in recent weeks, with more scheduled and on-track.

“However, we would be foolish not to plan for the worst,” Paszyc says. “One silver lining is we are using this time to work on projects that we’ve had on our ‘to-do’ list, such as improvements to our customer relationship-management systems, so we’ll be ready to hit the ground running when restrictions are lifted.”

Adjust expectations

To some extent, brokers see a willingness on the part of sellers and buyers to adjust expectations.

“Activity has slowed down,” says Karen Rich, with Malone Commercial Brokers in Portland. “But one thing we’re seeing is that, when there’s motivation on both sides, deals are moving forward.”

That motivation can come in the form of price adjustments and contract extensions.

“I see people cooperating more,” says Malone broker Cheri Bonawitz, who often partners with Rich on transactions from southern Maine to Bangor. The two recently closed four transactions — two multi-family properties, a laundromat and a seasonal retail business — that were underway before the emergency. The seller of the retail business came down in price in order to finalize the deal, she notes.

Buyers and leasers are still in the market.

“For instance, there are still 1031 buyers out there,” says Rich. “They will have already started this process 30 days ago, 60 days ago. They need to find a replacement property once they’ve sold their previous properties. Those people are potential buyers.”

Avoid further disruption

Brit Vitalius at Vitalius Real Estate Group in Portland sees a mixed impact.

“We’ve got the investor side of our brokerage with the multi-families,” he says. “We had one rather large deal close quickly, another was renegotiated and a third where the buyer walked from his deposit.”

File Photo / Tim Greenway
Brit Vitalius at Vitalius Real Estate Group in Portland sees mixed investor reactions: some close quickly, others renegotiate or walk away.

In some cases, buyers and sellers want to proceed quickly to close a deal before there’s any further disruption to the economy, he says. Some sellers have agreed to price adjustments.

Proactive communication along the chain that connects tenants, landlords and lenders is essential to “getting through this and out the other side,” Vitalius says.

“Landlords have tenants who are out of work,” he says. “It’s not clear when they’re going back to work or how they’ll get caught up on rent. I think there will be a difficult transition period, when there’s less income in the system, before we get back to being stable.”

Vitalius, who is president of the Southern Maine Landlord Association, says the association is offering guidance to landlords, suggesting they proactively reach out to tenants to ask if they anticipate having trouble paying rent.

“In all cases I’ve heard of so far, banks have been willing to work with the landlords,” he says. “We’re all in this chain linked together. If the tenants can’t pay the landlords, many landlords can absorb that a little bit. But the landlords need some give on the other side, such as deferral on their mortgage payments. If everyone gives a little bit for some period, we’ll get through this.”

Single-family homes

After a strong year of residential sales, brokers are adapting to client and customer concerns around COVID-19, says Tom Cole, 2020 president of the Maine Association of Realtors and managing broker of Better Homes and Gardens Real Estate The Masiello Group in Brunswick.

In March, the pace of residential sales appeared to slow as some buyers became more cautious, he says.

“But other buyers are taking advantage of lower interest rates,” Cole says. Overall, “We expect to see a softening of the numbers.”

Virtual tours had been in use for years, but are now more prevalent.

“I’ll walk through a house with my iPhone and show them different parts of the home,” he says of potential buyers.

Photo / Nadra Edgerley
Real estate broker Rob Edgerley, of Maine Life Real Estate in Scarborough, conducts a virtual open house March 20.

Scared buyers

Ellsworth activity has slowed, says Acadia Realty Group broker and owner Steve Shelton.

“People from out of the area are canceling their planned showings every day now,” Shelton says. “Things are still happening for sure. Just not as much.”

With 23 agents, his firm would have at least half showing properties of all types at any given time, he says. That’s changed. Recently, “one of my agents had some land showings, but that’s it.”

He adds, “Properties that were under contract are falling apart because the buyers are scared.”

In Bangor, industrial and office deals are staying on track, says Bev Uhlenhake with Epstein Commercial Real Estate.

“There are a variety of responses by customers during this time,” she says. “For deals in which we are involved, we are seeing most industrial or office deals continue. The industrial sector, which has had pent-up demand for quite a while, continues to be the strongest sector. The retail sector, not surprisingly, is showing the least strength.”

But “businesses are generally very cautious about making real estate decisions during times of great uncertainty,” she says.

Still, there are essential businesses in all sectors that have real estate needs, she says, citing a firm that is working with a health care agency whose lease is expiring and must move.

Winners and losers

Given today’s uncertainties, Uhlenhake stresses that observations about the industry are just a snapshot in time.

“We expect things will continue to change,” she says.

Says Moulton, “I think there will be winner and losers. A lot of good businesses and property owners will struggle.”

Sign up for Enews

Related Content


Order a PDF