The downtown Portland office market vacancy rate rose, but there were a healthy amount of renewals and small blocks absorbed so far in 2021.
Companies are beginning to bring more employees back to the office full time or with a hybrid model. While the downtown Portland office market vacancy rate rose, there also were a healthy amount of renewals and small blocks absorbed so far this year.
The overall vacancy rate finished the second quarter at 11.4%, climbing by 55 basis points quarter-to-quarter. All three property types saw an increase in the rate, with a total negative absorption of 28,637 SF. Focusing on Class B space, the majority of deals were small blocks. With new space hitting the market, it led to a negative absorption of over 11,100 SF. Class A saw a similar trend, but we should see a positive shift next quarter when the University of Maine School of Law leases 60,000 SF at 300 Fore Street (pending local approvals).
The overall direct rental rate for downtown Portland increased by 2.7% ($0.55 PSF). This shift was caused by a 5.9% ($0.89 PSF) jump in Class C category. This change was solely due to removing the above average asking rate at 19 Commercial Street, after being leased in May.
One of the main topics of conversation from the pandemic has been sublease space hitting the market due to companies potentially downsizing. However, since the beginning of the year, there was only an additional 2,000± SF of sublease space added through the second quarter – and mostly in the Class A category. We will continue to monitor this trend over the next couple of months, seeing if companies are renewing their footprint, giving back SF with their renewals, or bringing out space for sublease.
At Colliers, we internally track 5.3 million SF of office space in downtown Portland. Our inventory includes buildings and condominiums 10,000+ SF and are classified as Class A, B, or C.