On May 24, Shannon Richards, Founder of Hay Runner, was a commentator for the Maine Real Estate & Development Association’s (MEREDA’s) 2022 MEREDA Index. Shannon’s comments on the Commercial Sector follow Economist Charles Colgan’s analysis for 2021.
The MEREDA Index is a measure of real estate activity designed to track changes in Maine’s real estate markets. The Index is a composite of nine seasonally adjusted measures reflecting both new development and transactions involving existing properties and it covers both the commercial and residential markets statewide. The most recent edition covers the year 2020 and provides commentary on the Commercial, Residential, and Construction sectors. The MEREDA Index for 2021 is 116.3
THE CONSTRUCTION COMPONENT: 96.3
[Charles Colgan Analysis] “The Construction Employment Index was up 0.8% in 2021 over 2020. The seasonally adjusted index was strongest in the second and third quarter, but employment tailed off in the first and fourth quarters. The large volume of commercial transactions and growth in square feet together with growth in residential permits should probably have resulted in more of an increase in construction employment than was actually observed. The rather modest increase very likely reflected the overall labor shortages that characterized the economy throughout 2021.”
[Shannon Richards, Founder, Hay Runner] “I picture construction’s share of the Maine economy like a huge sound system – the volume cranked up too high and base thumping hard…exciting and energizing, but after a while it feels like we need to dial it back a bit. The pressure is high and not letting up. Here’s why:
The construction market in Maine crosses many sectors – industrial, commercial, retail, and residential. While a little different for each, one thing remains constant: more than enough work, not enough bodies. Baby-boomers are retiring in droves, and news flash – there are not enough Gen-Xers to take over. Millennials are starting to fill the gaps, but experience is a desirable and uncommon differentiator. These labor shortages are a critical factor in the success of our construction businesses, and the economy overall. Right now it’s putting a major restriction on how much and how fast we can build… and, trust me, there is a waiting list.
I see three other factors driving the construction market and adding to the pressure: cash, remote work, and home improvement. With lots of available cash and rates still low, money is looking for places to diversify and return to investors. This is helpful to commercial and industrial locations… heck, even hotels are bouncing back. Covid may have shaken the tree and helped solidify areas of opportunity. Next, remote workers ‘from away’ are relocating to ‘Vacationland’ and turning it into ‘Staycationland.’ When they come, they bring their salaries and sometimes their businesses. Lastly, Mainers of all types have been on lockdown and want to improve or expand their homes. The trend I have seen is clients are saving more and their spending habits have changed. Family life has changed, too, thanks to the ‘work from home’ model…and oh, yeah, many had ‘kids at school’ working next to them so they desperately needed more space.
Focusing on 2021 residential construction, activity was strong despite Covid – especially along the coast. The aging housing stock in Maine means most existing housing needs to be renovated and many homeowners lack the experience or desire to work on their homes themselves. With a critically low supply of housing and the federal infrastructure stimulus coming, we may see more people settle here, which will only increase the pressure to build new or improved homes. A state with such a modest population is bound to feel changes like this across the board and it’s likely this uncomfortable transition will take years to play out.”