BY Kristie Russell, Research Director | Colliers Maine
Market Summary
Downtown Portland posted its second straight quarter of positive absorption, and the gains came from steady activity rather than one big deal. Several leases, mostly under 10,000 SF, drove the improvement, while no large blocks of new vacancy hit the market.
Two of those deals were at 280 Fore Street, a Class A building. The Elmet Group leased 9,947 SF, moving up from Class B space. Quanta Infrastructure Solutions Group leased 7,184 SF for a new Portland office, giving its growing engineering and project management team a home downtown.
Several of the larger deals this year have been renewals, a sign that established tenants are committed to staying downtown. Sublease space also continues to shrink as more of it finds tenants or goes back to landlords.
While there were no office sales that closed in the third quarter, investors were active earlier in the year. Two notable investment sales in the first half, including the $33.8 million sale of 100 Middle Street, show buyers still see long term value downtown.
Landlords are still showing flexibility on larger blocks of space, offering added tenant improvement allowances and free rent to get space leased. Smaller spaces are moving without those extras. No new office buildings are planned downtown, so the amount of available space should stay about the same through the end of the year.
Downtown itself keeps getting stronger. Construction nearby, including a former bank building being converted into a hotel, will bring new amenities for people who work downtown. Those additions make downtown a better place to work and give companies one more reason to keep their offices here.
Rental Rates
Rents in downtown Portland were nearly unchanged from last quarter. The average asking rent is $22.70 modified gross, down 2.2% over the past year. Class A saw the biggest drop at 8.3%, Class C dipped as well, and Class B climbed.
Direct asking rent, meaning space listed by landlords, followed the same pattern. It dipped 1.5% year-over-year to $22.50, with Class A and Class C down and Class B up. As a result, Class B rents are now running higher than Class A. Class A buildings hold more of the market’s larger blocks of space, and some landlords are pricing those spaces to meet tenants and get them leased. A few Class B listings are also priced well above the class average, which pulls that number up.
Sublease rents fell 3.1% to $25.03, with Class A rates dropping and Class B holding steady. The bigger story is how much sublease space has left the market. Available sublease space is down 31.7% from a year ago, as space was either taken by new tenants or returned to landlords to lease directly. That shrinking supply is changing sublease pricing as well.
Over five years, the average rent has barely moved, up 0.5% from the third quarter of 2021. The class-level view looks very different. Class A rents are 8.9% lower than five years ago, as landlords work to fill their buildings. Class B is up modestly, while Class C has climbed 22.4%.
Vacancy Rates
The downtown Portland vacancy rate improved in the third quarter, ending at 12.9%. That is down 0.6% from the prior quarter, with all three building classes seeing less empty space. Compared to a year ago, the rate is up just 0.3%.
Class A continues to lead the market. Its vacancy rate fell 2.0% over the past year to 9.9%, the lowest of any class, as flight-to-quality keeps shaping tenant decisions. Class B and Class C both saw vacancy rise over the same stretch. Even so, the small change in the overall rate suggests most of this movement is tenants trading up to better space, not companies leaving downtown or cutting back in large numbers.
Demand picked up as well. The market posted 34,189 SF of positive absorption in the third quarter, with all three classes adding occupied space and Class B leading the way. It’s the second positive quarter in a row and the strongest result since late 2024, a sign that tenant demand is building after a slow start to the year.
Over five years, vacancy is still 3.3% higher than it was in the third quarter of 2021. All three classes are sitting above where they were, with Class B seeing the biggest climb at 4.5%.
