PORTLAND, Maine — The forecast for development in the Bangor area has bright spots, including the city’s emergence as an entertainment destination, but uncertainty hangs over the ripple effect paper mill closures will have for the regional economy.
“So much of the industry that supported the mills was located [in the Bangor area],” said Bev Uhlenhake, a broker with Epstein Commercial Real Estate, who presented her 2015 real estate forecast to a statewide audience at the Maine Real Estate and Development Association’s annual forecast conference Thursday in Portland.
The projections for Bangor came aboard an overall positive forecast for the state, with TD Bank economist Michael Dolega forecasting the start of some growth in wages and the best year for Maine’s economy in a decade, although he still expects the state’s gains to lag behind the rest of the country.
While an improving labor and housing market and possible rising interest rates play out nationally, Uhlenhake said the fallout of paper mill layoffs and closures will be something to watch in 2015. However, she forecasts improvements for Bangor’s downtown and mall retail activity.
Uhlenhake said the Bangor region’s retail sector will continue to be the most active, particularly with growth of space in the Bangor Mall area, including nearby retail spaces across Stillwater Avenue from the mall.
According to statistics tracked by Uhlenhake’s company, the region’s new retail development has concentrated around the mall area since the recession, adding 495,609 square feet since 2009, with about 100,000 square feet added in 2014.
By the end of 2014, the 3.17 million square feet of retail space at the mall area made up about half of the 6.4 million square feet of retail space in Bangor and Brewer, where Uhlenhake also is a city councilor.
At the same time, the vacancy rate for the mall has declined from about 11 percent in 2009 to 7 percent last year.
Uhlenhake said the mall continues to benefit from being a destination for shoppers across northern Maine and parts of New Brunswick, Canada, and that Bangor’s growth as an entertainment destination stands to bolster that type of economic activity.
John Porter, president and CEO of the Bangor Region Chamber of Commerce, said growing entertainment options fit well with other services such as health care that bolster the city’s offerings as a service center, including medical care.
“There is a synergy among all of [those industries] with Bangor being a service center north to the border and east into Canada,” Porter said. “I think that is one of the things that we have going for us.”
The next challenge in building the region’s economy, Porter said, is fostering industries outside of a manufacturing-retail model of business to other services that could branch out from the existing areas of strength.
While those sectors have excelled, downtown retail vacancies shot up in 2014, but Uhlenhake said the rise from 7 percent vacancy in 2012 to 12.3 percent last year was driven by a few large vacancies.
“That’s not a reflection of the market, though, but the reflection of a couple of large spaces,” Uhlenhake said, forecasting that vacancy rate will drop to about 4 percent in the next year. It was about 14.5 percent in 2009 and dropped to 7 percent by 2012.
That vacancy increase in the last year runs against a decline in the non-mall retail space on the market, which fell by about 48,591 square feet in Bangor and Brewer from 2009 to last year.
Uhlenhake said gains in retail space at the Bangor Mall and losses elsewhere aren’t directly related but the result of new retailers seeking out space only at the mall and, at the same time, retail outside the mall converting to other uses.
“A lot of the places that lost businesses in 2008 did not recover from the downturn,” Uhlenhake said. “Rather than getting sold for other retail, they got supplanted with service businesses or medical offices.”
She said Penobscot Community Health Care moving into the former Wilson Square Shopping Plaza and service businesses moving into Brewer’s Twin City Plaza are examples of that trend.
“It’s a shift in the types of tenants that we see,” Uhlenhake said.
At the Bangor Mall, she said more national retailers are willing to enter the market because they see other businesses succeeding there, despite a demographic profile that might not resemble what national retailers typically seek.
“The chains that are coming to the market, they used to come in and say that I want a spot at the mall and a spot on Wilson Street and on Broadway, or on Broadway and Union,” Uhlenhake said. “Now they’re coming in and saying, ‘I want to come to Bangor, I’m coming to one store, and that’s going to be at the mall.’”
At the beginning of the year, about 98.7 percent of the mall’s 652,531 square feet was occupied, according to the most recent annual report of the mall’s majority owner, Simon Property Group.
For the downtown, Uhlenhake noted that the blossoming of Bangor as an entertainment destination also stands to have an indirect effect on real estate activity and the willingness of people to make new investments.
“People who are in Bangor feel really pretty confident about Bangor, and confidence breeds investment, and confidence breeds entrepreneurship, and confidence breeds risk-taking,” Uhlenhake said.
She said some of that is reflected in the coming addition of 50 new apartments downtown with prices at or above market rate.
Other areas — such as office space and industrial retail — have experienced less dramatic movement since the recession, but Uhlenhake said she’s concerned that layoffs more than a year ago at Lincoln Paper and Tissue, layoffs to come this year at UTC Fire and Security in Pittsfield and the closure of Verso’s Bucksport mill could lead to some business closures in the industrial sector.
Vacancy rates peaked at 10.3 percent in 2011 and held steady at 10 percent last year, while the sector has gained back some of the inventory lost from 2009 to 2011.
“How are those industries going to be affected, I don’t know for sure,” Uhlenhake said.