The Greater Portland office market continues to gain momentum in 2015

The good news continues in the Greater Portland office market, as 2014 marks another year of positive results across both downtown and suburban markets. * Overall vacancy decreased for a 3rd straight year, now below double-digits at 8.48% and at a pre-Great Recession level equal to 2008. * Net absorption remained positive for a 4th consecutive year, increasing by 76,297 s/f or .77% (since 2009 the office market has averaged over 100,000 s/f of annual positive-absorption). * Leasing activity was down by 5% in 2014, but still within a healthy range. Since the low in 2007, leasing activity has now grown at an average annual pace of 4.7%. * Asking rental rates increased by 5%, on a weighted average basis, with all sectors coming in higher in 2014 versus the prior year. * Sales activity increased in 2014, with a larger number of investment-properties changing hands than has been seen in years. * Shadow space looms on the horizon for 2015, with nearly 300,000 s/f of possible new vacancy for the office market. If this vacancy was affective today, the overall rate would jump from 8.48% to 11.33%. Results were strong in 2014 for the downtown office market, with overall vacancy down by nearly 2% to 9.38% and net absorption positive by 63,987 s/f or 1.39%. A major driver was the reduction in available sublease space, down by 45,000 s/f for the year. The Class A sector posted the strongest results, with overall vacancy down 3.25% to 7.75% or nearly one-half of what this sector posted just two years ago. The net result was positive net absorption of nearly 34,000 s/f or 1.94%. Sublease vacancy was also down by 22,500 s/f, another contributing factor to the lower overall vacancy rate. The upward trend continued in the suburban office market, now with a 5th consecutive year of reduced overall vacancy and positive net absorption. Overall vacancy was down 1.26% to 7.7% with positive net absorption of 12,310 s/f or .23%. Also of note, asking rental rates increased by nearly 2%. The class A sector was consistent with recent history, posting a 5th year of reduced overall vacancy (down to 6.22%) and positive absorption of 10,147 s/f or .41. Multiple lease-ups in the class B sector resulted in a drop in overall vacancy by 1.31% to 8.98%. Also of interest, Portland's Old Port continued to be a draw for office users in 2014, where the vacancy rate is now at 9.95% versus 10.75% one year ago. More particularly, the Commercial St. corridor posted strong results, with vacancy now at 2.33% and asking rents increasing on average by 11% over the past two years. Office, retail, hospitality - all segments within the Old Port that are vibrant, synergistic and truly at the heart of Portland's economic engine. Matthew Barney is a broker for Malone Commercial Brokers, Inc., Portland, Me.