Regional Spotlight: Portland, Maine
The Northeastern market remains competitive in 2020.
As with every other U.S. city, Portland, Maine, entered summer 2020 pulled in many directions. Fortunately for Portland, as the most populous city in Maine with just over 66,000 residents (according to 2019 U.S. Census estimates), some of the tension in the market has been due to a competitive housing market and an economy that’s tentatively recovering.
That economy, which has historically relied largely on the tourism and service sectors, may well turn out to be the sort of “diamond in the rough” that truly shines and grows in value under pressure.
“Portland went through a big hospitality boom that led to a second-home boom in this market,” Fred Forsley, founder and owner of the local Shipyard Brewing Company and a real estate investor, said of the pre-coronavirus market and economy in the area. “Now, even more people are thinking about buying a condo in Portland and doing business here as well as vacationing here.”
“We are experiencing an influx of buyers triggered by the need to get out of their current situation,” said Nancy Carleton, a managing broker at William Raveis Real Estate in Bath.
Carleton said she is seeing buyers from most of New England and as far south as Pennsylvania.
“People have discovered they can work from home and realized they may continue to work from home for the foreseeable future. That is freeing them up to buy more substantial properties as they plan on spending more time in Maine,” she said.
Forsley, who developed eight residential condo units as part of a larger project near his brewery noted that many of his buyers spent about half their time in the Portland area and the other half in a major metropolitan area like New York City or Boston before the pandemic. However, with COVID-19 still ravaging many densely populated areas of the country, second-homeowners could well begin making more use of their vacation location.
“[This spring] people definitely came to their second homes in Maine and then stayed to work remotely,” Forsley said.
The result, in Portland at least, has been that development has continued wherever possible. At present, Forsley is involved in several development projects, including a waterfront site, high-end condos and the beer-themed Cambria “brewtel,” the first of its kind in Maine.
Pandemic Partnerships Keep the Market Moving
With Redfin describing the Portland market as “very competitive” at the end of July 2020, the city’s real estate market seems to be holding firm during the COVID-19 pandemic. “Homes sell for around list price and go pending in around 10 days,” Redfin agents reported, and June sales prices were up just over 8% year-over-year.
Much of the competition for homes comes from outside the state, said agent Rebecca Kingsley. As an associate broker for the Hatcher Group of Keller Williams Realty, Kingsley specializes in helping clients from out of state.
“If they are working remotely, why not bring that national dollar to Maine and be able to continue on with their Chicago salary?” she said.
However, many local housing advocates are becoming concerned those out-of-market dollars could price Portland locals out of housing options. With a low inventory of available properties, the trend in rising prices seems unlikely to change direction any time soon.
Maine Realtors Association president Tom Cole told the Portland Phoenix, “Maine’s for-sale inventory is down 19% compared to a year ago.”
Inventory availability is unlikely to loosen up any time soon since so many Americans are
now actively considering moving out of denser urban areas into cities like those in Maine.
One advantage for real estate investors looking to acquire properties in the area is the local planning board’s ongoing work during the pandemic. The determination to keep development moving represents a certain degree of hope for local homeowners wanting to acquire an affordable residence. Despite beginning virtual meetings in April, the city has still managed to approve about 150,000 square feet of construction ranging from residential developments to medical offices to utility projects.
“At the beginning of the pandemic, we established a goal here in the city to support the continuation of city development approvals and ongoing construction activities while protecting public health,” said Greg Mitchell, Portland’s economic development director.
The city pivoted quickly to remote services to keep developers actively working in the area. Local developers agreed to take on “the responsibility of public safety and the public health crisis” in exchange for continuing work. The result of this was that hundreds of local workers remained employed on job sites and many developers avoided breaking commitments made to investors.
The city’s Port of Portland, the largest tonnage seaport in New England, has also remained open for most forms of cargo. As in most ports, cruise service has been suspended, but Maine ports are exploring options for permitting some cruise ships to dock in the area and possibly board a limited number of passengers. The presence of a large port like the Port of Portland provides additional economic insulation to the Portland area, since shipping, storage and related services are largely considered essential services and continue running during shutdowns.
Portland’s Emerging Markets Could Stabilize a Service-Centered Economy
While some of the nation’s highest-profile hospitality and service-industry markets are suffering record-breaking unemployment and economic meltdowns, Portland appears to be weathering the storm relatively well. Portland’s May unemployment rate, for example, was 10.3%, below the national average of 13.3% for the same period.
Forsley credits job growth in biotech companies and the “nonseasonal” second-home market for much of the market’s stability. He explained that in Portland, Maine, second homes are not generally used solely along seasonal parameters, unlike many other northern vacation homes. Portland has also benefited from its state’s emerging life science and biotech markets and is home to many of the companies that are currently on the forefront of the worldwide effort to stop COVID-19.
“Maine’s biomedical and life science companies are providing crucial tools in the global fight against COVID-19. High demand for their products and expertise has increased the need for workers, and many of these companies are hiring new employees right now,” said Agnieszka Carpenter, executive director of BioME, the Bioscience Association
of Maine.
Portland’s 220 biotech and medical-product companies were already benefiting from close proximity to Boston, New York City and Montreal.
After the pandemic took hold this past spring, global companies like IDEXX Laboratories, the nonprofit Foundation for Blood Research, and the Maine Medical Center Research Institute (MMCRI) found their services more in demand than ever. Northeastern University will also open a new science campus, the Roux Institute, in Portland this September. The university predicts the campus will be “an innovation hub for research and graduate education in technology and data science,” something that will only add to the population of local professionals in these industries.
Thanks to tech-friendly state and local policies that include a research and development “super credit” and a high-tech investment tax credit, the city’s growing bio-tech community is likely to explode over the next 12-24 months. With that growth will come
new employment opportunities across the board as biotech companies and medical research companies are generally considered essential services.
Those facilities will require new construction and development both in a commercial and residential sense and, with that new development will come additional employment opportunities. According to the Economic Policy Institute, every 100 jobs in science and technology services equates to an additional 418 “indirect” jobs. It is easy to see how the Portland population and, subsequently, economy might expand in the coming months.
“This was already a great city. It’s one of the nicest places in the world,” Forsley said. “It’s a very exciting time for real estate investors in Portland, Maine.”
Sidebar 1: The Truth About the “Urban Exodus”
Conventional wisdom (and a lot of armchair economists) speculates that as the COVID-19 pandemic continues to affect every aspect of American life, an increasing number of urbanites will begin moving outward into suburban and rural areas. While these predictions have not yet come to pass, despite a great deal of media hype around the topic, Portland, Maine, is uniquely positioned to benefit from what passes for an “urban exodus” as former residents of New York City, Boston and even Montreal move toward the relatively small metropolis in order to enjoy the outdoors, the easy access to their formal urban locales and a more affordable cost of living.
Not surprisingly, while rising interest in Portland housing is great for home prices, it comes with a little bit of animosity on the part of some locals. Early on in Maine’s statewide shutdown, local real estate agents compared interest in the area to similar trends that emerged after Sept. 11, 2001.
“We saw that [relocation] after Sept. 11, and we’re seeing that now again,” observed one broker, explaining that a desire for an “escape spot” was a dominant reason many out-of-state residents were looking at homes in the area.
Interestingly, one thing that slows many would-be Mainers down from a full relocation is limited availability of high-speed internet in much of the state. Fortunately for residents of Portland, the city already has a variety of high-speed options for residents. To further improve the situation, in mid-July Maine voters approved a pair of bond proposals that included $15 million to improve high-speed access in Maine. Those funds will be matched with an additional $30 million to that end.
“People who have been working at home because of the coronavirus now understand the importance of high-speed internet that many rural communities lack,” said David Farmer, a consultant on Question 1 of the vote.
Sidebar 2: “Walkability” in Portland, Maine
The sight of all your neighbors out striding the streets in the middle of the day is one that was certainly not common in most parts of the U.S. before the COVID-19 pandemic. However, thanks to stay-at-home orders, restaurant closings and the complete lack of American faith in the ability of movie theaters to keep them safe from infection, the Great Outdoors is making a comeback.
From proposals that urban areas convert different neighborhoods into “15-minute cities” that are highly walkable and offer all necessities, (e.g., shopping, employment and recreation) within a 15-minute walk or bike ride to the rise of the planned and walkable “Main Street” emerging in rural and suburban areas, the concept of walkability is certainly having a moment.
However, how much value does walkability actually offer in a time when most citizens of communities are less interested in walking as a form of commute and more interested in walking as a form of long-neglected recreation?
The answer, it turns out, is beneficial to Portland, Maine, a city dubbed by Redfin, the inventor of the walkability score, as merely “somewhat walkable” since “almost all errands require a car.” What the city lacks in walkability, however, it makes up in access to natural beauty. The “Forest City” boasts more than 700 acres of open space linked by 70 miles of urban and wooded trails maintained by the nonprofit Portland Trails.
Interestingly, the Portland city council banned the use of synthetic pesticides in 2018 and requires “organic land care” on both public and private properties. With its beautiful natural land and seascapes, Portland may not have the highest “walk score,” but it tops the list when it comes to beautiful places to walk—and that may well be what matters most.
