I recently penned some tips on how to move your office space in today’s market. The general tenets of that piece — planning, delegation, communication and patience — are equally applicable to the industrial market. However, the distinction between the two is the dramatic difference in the supply and demand.
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The Dunham Group’s Justin Lamontagne is a partner and designated broker focused on office and industrial real estate.
The office market has gone through an incredible transformation in a post-pandemic world. While Southern Maine isn’t as dire as other major municipalities, there’s no question that the office market has softened.
The industrial market, on the other hand, has never been tighter. After a decade run of increasing property values, decreasing vacancies, and steady demand, today the Southern Maine industrial market is facing a historically low 1.91% vacancy rate. So how does an industrial or warehouse business find real estate? Here are some tips:
Broker engagement
Alert, alert: Self-serving tip! Truly, whether with my firm or my competitive associates in the field, finding the right broker to work with is a critical first step. Real estate brokers specializing in commercial and industrial properties have extensive networks and market insights. Not only do we have a handle on the existing inventory, but we can also likely shed light on upcoming listings and off-market properties. And, importantly in a competitive market, an experienced broker can help guide negotiations and best position your offer to be accepted.
Progressive monitoring
The above tip notwithstanding, brokers are fallible. I like to work both with and for my tenant clients. So I encourage mutual regular monitoring of online listing platforms, staying updated on new properties entering the market. We can also set up alerts (similar to MLS residential searches) and carefully review the criteria to ensure you receive notifications for new properties that match your requirements.
Have a flexible search radius
In a low inventory market, if possible, consider expanding your search area. It is worth an internal analysis of what it would mean for drive-times, employee locations and count, potential labor pool, etc. Ultimately, it might not be financially or logistically possible to consider other locations. But if the real estate proves to be the top priority, casting a wider net will certainly present more opportunities.
Think outside the box
The repositioning of office space into light industrial and storage is fascinating to consider. No commercial real estate asset was hit harder by the pandemic than the office market. Large swaths of open office space sit empty in the Greater Portland suburbs and some, particularly first floor spaces, are prime for industrial conversion. As we once saw with large, big-box retail conversions, so too I think we will soon see in the office market. And industrial lease rates are beginning to mirror and surpass office space rates. So it could be a real win-win for tenants and landlords alike.
Tap into your network
I like to say that Maine’s a small town. To the extent that it is appropriate, take advantage of your own network and spread the word about your requirement. Of course, often times these searches can be sensitive and confidential, mostly out of respect to employees. But if you have got a trusted circle, even a small one, you never know what other business and industry associates might know and hear.
Be patiently aggressive
As important as anything will be timing. Plan to have a long runway towards your industrial relocation, perhaps as much as 12 to 18 months. Clearly, in a tight inventory market, it could and probably will take time to find the right space. That said, have everything you need to sign a contract teed up, including financing, internal approvals, senior management input and support, etc. When an opportunity presents itself you’ve got to be positioned to act quickly and assertively. Property owners and landlords have the luxury of choice; tenants might not.
Frankly, finding industrial real estate in southern Maine is as challenging today as it’s ever been. It will require resourcefulness, patience, compromise, flexibility and a proactive approach. Remember to stay persistent, adapt to the market conditions, and explore various avenues to uncover off-market opportunities. With these tips in mind, I am confident you will find the industrial real estate you need to support your business’s growth and success.
