The MEREDA Index, a key economic indicator for the state of Maine, was presented yesterday at the Maine Real Estate & Development Association’s (MEREDA) 2019 Annual Forecast Conference. While the Index was little changed in the last six months, declining by 0.2% since the first quarter of 2018, the individual components of the Index—commercial, residential, and construction—help tell the story beyond the numbers.
“When we elected to embark on this project in 2013, we understood that this was information that over time would become more meaningful, as a way to compare and chart the progress of the real estate industry in Maine,” says Gary Vogel, MEREDA President and attorney at Drummond Woodsum.
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. This most recent release covers the middle two quarters of 2018.
“We asked our commentators to share their ‘boots on the ground’ perspective for their sectors so we can all have a deeper understanding of what the nine data points of the Index demonstrate not just for the real estate industry, but also for everyone in Maine,” continues Vogel. “Relating the broader market data to individual experiences and local variations is part of what makes this project so interesting.”
The MEREDA Index was tabulated by economist Dr. Charles Colgan with commentary from Roxane Cole of Roxane Commercial Real Estate, LLC; Tom Landry of Benchmark Residential & Industrial Real Estate; and Tim Hebert of Hebert Construction, LLC.
Overall, the Index showed small changes in this edition, the result of growth in the residential and construction components offset by declines in the commercial component.
Per Dr. Colgan’s report, the commercial component recovered to pre-recession levels in 2013 and peaked in the second quarter of 2016. Since then the volume of transactions and the total volume of building square feet leased and sold has been declining. Over the past six months, these have declined 10% and 20% respectively. However, the per square foot lease and sales price indexes have showed continued growth over the past six months, the former Index up 2.4% and the latter up 8.7%. Overall, the commercial component declined 2% over the past two quarters.
“The commercial component continues to show great energy even with the slight decline measured in the Index,” says Roxane Cole. “While the bulk of the activity is in southern Maine, the pockets of activity throughout the state are equally interesting. One example is the investments being made in downtowns around the state.”
Sales of existing houses and permits for new residential construction continued to grow at 1.9% and 2.3% respectively over the past two quarters. Mortgage originations also grew apace with sales of existing units at 1.3%. But the seasonally adjusted median price showed little change through the first three quarters of 2018, falling 0.5% from the first to second quarter and rising 0.4% from the second to third. Overall, the Index for the median price fell 0.2% over the past two quarters. The net effect of these changes was a rise in the residential component of 1.3% over the past 6 months.
“It’s all about location, location, location,” says Tom Landry. “[I]t’s a great time to invest in Maine’s urban areas,” Landry continues. “And it’s not just Portland, smaller cities and towns like Westbrook, Yarmouth, Brunswick, and Biddeford, for example, are investing in their infrastructure, business community and town centers as well.”
The construction employment component also showed strong performance over the past six months up 5.1%. At 29,100, construction employment in Maine is still 2,300 below the pre-recession peak of 2006Q1, but 5,000 above the lowest level in the recession in 2009Q4.
“I would equate the current pace of the construction industry to that of a startup company,” says Tim Hebert. “Opportunities arise faster than there are people available to perform the work. Contractors are turning away work because the projects have such accelerated timelines for the work to be under contract and complete.”
This edition of the MEREDA Index was underwritten by Eaton Peabody, with support from Benchmark Residential & Investment Real Estate, Katahdin Trust Company, Redstone, Reger Dasco Properties, and XPress Copy