Maine CRE Shifts: Is Retail Staying Retail?
- Jun 4, 2024
- 3 min read
Navigating New Trends in Maine's Retail Sector
Retail space has undergone significant transformations over the past decade and a half. This analysis focuses specifically on retail center-type retail spaces, with trends related to downtown retail spaces covered in a separate article from Core Market Advisors.
The traditional retail sector has faced unprecedented challenges in recent years, particularly with the meteoric rise of e-commerce, which has altered consumer shopping behaviors dramatically. These shifts have not only impacted foot traffic and sales but have also initiated a broader conversation about the utility and design of physical retail spaces.
Ground Level: What's Happening with Retail Space Now?
In the aftermath of the 2008 financial crisis, many markets experienced a decline in retail demand, leading to substantial vacancies. Initially, this trend predominantly affected tertiary markets but soon extended into more densely populated areas. Maine markets, such as Freeport and Kittery, initially seemed immune to such slumps. However, by 2019, retail sales figures in these markets showed unprecedented declines and we began seeing vacancies in retail spaces in Freeport for the first time in decades. Changes at this time were largely attributed to the rise in online shopping.
This decline in retail sales was immediately followed by a reinforcement of these consumer trends during the COVID-19 pandemic as shoppers grew more reluctant to leave their homes, further bolstering the appeal and habits of online shopping.
If Not Retailers, Then Who?
Following the 2008 financial crisis, there was a notable trend of medical offices moving into high-visibility retail locations, repurposing under-utilized spaces. This trend slowed with the implementation of the Affordable Care Act, due to changes in hospital billing practices. However, the conversion of vacant retail spaces for medical use has seen a resurgence in recent years in some markets.
In our research of retail space in various markets around Maine, there are two factors that commonly play a role. Competition among area hospitals often leads to an interest in retail space, which typically offers relatively high exposure. In markets with one hospital and no competition, hospitals are generally happy to keep all of their medical office space within the hospital campus. Additionally, hospitals that are running out of space or have run out of space have a need for additional space and under-utilized space can be an accessible solution.
Other ways we have seen under-utilized retail space become occupied are to focus on experience-based services such as amusement - i.e. trampoline parks, laser tag, etc. Repurposing retail space for professional office is not as viable in most markets given the challenges facing professional office in Maine Markets.
Today, the retail sector's landscape remains varied. Some under-utilized retail center spaces continue to sit vacant, while in other markets, property owners have successfully connected with alternative users. While the sustained retail use of these spaces often focuses on service-based operations, such as restaurants, which cannot be supplanted by online shopping, the need for strategic pivots remains evident.
The evolving utilization of retail center spaces underscores a dynamic market where adaptability is key. The ongoing challenge for retail property owners is to remain flexible while finding innovative ways to attract and retain alternative users in an increasingly digital world.
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For more in-depth analysis and future updates on Maine's commercial real estate market, keep an eye on Core Market Advisors. Your trusted source for professional CRE insights.
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