When Chris Worden decided in October 2020 to open Fat Panda Boba Tea and Market in Bangor, he never thought it would take him eight months to find an available location.
Worden said he had fewer than 20 available spaces to choose from in the area, and the property he selected in a Harlow Street shopping center needed “six figures of work” after he signed the lease in May 2021.
The Asian grocery store and cafe finally opened in December.
With his business thriving, Worden said he’s looking to open a second location in Hancock County. But this time he’s considering building a property rather than leasing an existing space. There simply aren’t many commercial retail properties available, he said, and those that are available often are older and need extensive work.
Worden’s experience isn’t unique. Business owners looking to open or expand in the Bangor area are finding a commercial real estate market that has grown tighter in recent years to the point where suburban strip malls are at their fullest point in decades. While the tight market reflects some vibrancy in the regional economy, it also limits its potential to grow.
The constraints in the commercial real estate market are apparent in all sectors, according to data gathered by Bev Uhlenhake, a broker at Epstein Commercial Real Estate in Bangor. The industrial real estate vacancy rate in Bangor, Brewer, Hermon and Holden has dipped below 2 percent from 7 percent five years ago. Retail vacancies, both in downtown and more suburban areas, hovered around 5 percent as of October 2020, down a bit from 7 percent in 2017. And office space vacancies have also dropped.
Currently, the area’s vacancy rate for suburban offices is about 5 percent, down from 9 percent in 2017, according to Uhlenhake’s data. The vacancy rate in downtown Bangor is about 6 percent, down from 10 percent five years ago, showing the COVID-19 pandemic didn’t cause a major exodus of office tenants.
A 5 percent real estate vacancy rate in a market is known as “functional vacancy,” Uhlenhake said, meaning businesses can still move or expand even if they have to give up on certain preferences.
“Sometimes tenants need to take a location that they’re not as fond of,” Uhlenhake said. “If they have a dream location or layout, they may have to give on those, but we can find them space.”
Uhlenhake credited some of the limited available space to developers’ tendency in the Bangor area to build spaces for specific tenants, rather than build and hope tenants will follow.
This model, relatively unique to the Bangor area, creates security for property owners, but it means the area isn’t “overbuilt, so we don’t have a lot of extra space for people to move into,” Uhlenhake said.
Industrial real estate is hard to come by, and in the retail sector, suburban strip malls are “fuller than we’ve seen in decades,” Uhlenhake said. Those areas have a mix of local businesses and national enterprises and are usually anchored by a large tenant like a grocery store.
While the tight market shows economic vitality, it also means that some businesses interested in Bangor have been unable to open here, said Tanya Emery, the city’s economic and community development director.
“This is a constraint that affects our ability to grow the economy and both attract new businesses and support the growth of our existing business base,” Emery said. “The lack of space, plus the time and cost to build new, makes it challenging to attract or grow a business if we don’t have the right available space.”
The lack of available space has become a problem in the past five years, Emery said, a result of low inventory in southern Maine driving some business owners north in search of space, and the advent of Maine’s marijuana industry, which has added competition for industrial space in particular.
Finding a location to open a recreational cannabis shop is “the No. 1 challenge facing cannabis companies, not just regionally but nationally,” said Matt Hawes, co-owner of Brothers Cannabis, which opened its first location, on Stillwater Avenue in Bangor in January 2021, and a second location, in Brewer, last month. The company expects to open a third shop soon, on Broadway in Bangor.
In addition to the tight commercial real estate market, marijuana businesses have to navigate sometimes strict local rules governing where they can set up shop, a limited number of towns and cities that even allow marijuana businesses and resistance from many landlords to hosting a cannabis business, Hawes said.
“Within that geography, you have to find available property, and it has to be owned by a landlord that’s willing to lease it to a cannabis company, which many of them are not,” Hawes said. “Because of the federal banking laws, there can be no note on that property being held by any major financial institution. That takes almost all properties off the market.”
Hawes said he managed to find his business’ three locations through a combination of luck and having a broad network in the Bangor region.