The biggest variable in commercial real estate over the past year has been commercial office space. That’s likely to continue through 2023, says Joseph Malone, founder and president of Malone Commercial Brokers in Portland.
“Office is the weak spot,” he says. “Many people still have not returned to the office.”
There’s been significant downsizing among some larger users, particularly national tenants.
“I think that trend will continue in 2023, making office space the most unstable segment of the commercial industry, particularly in the suburban market but, really, everywhere,” Malone says.
And the ripples from fewer office users trickles down to support businesses around them. But downtown Portland seems to be something of a beneficiary of some of the downsizing.
“Some suburban tenants have looked at coming downtown, taking less square footage for a higher-end office space,” he says. “So downtown Portland has held up better than some of the southern Maine market.”
Developers are scouting out office buildings, particularly in downtown Portland, as conversion opportunities for hospitality and residential use. That’s likely to continue, he says.
More broadly, the industrial market has been holding up well and is likely to continue that way.
Retail real estate has been surprisingly strong. “It’s been more stable than I expected,” he says.
Also likely to continue is condominium and apartment development. “I think the inventory is still below market, despite the fact that construction costs are so high,” he says. “There seems to be an appetite for additional units and developers are still meeting that. It’s slowed a bit, but it’s still pretty strong despite high interest rates.”
The overall outlook? “There’s more caution but, right now, the market is pretty steady,” says Malone.