The marijuana boom is one of the reasons Bangor has almost no industrial real estate available
Bangor is on the cusp of an industrial construction renaissance, with existing building vacancy rates below 1%, as demand for warehousing increases alongside adult-use marijuana grow space.
The critical need for industrial and flexible space in the Bangor area is driving businesses to build new space and increase sales of vacant land for the first time in a long time, said Tanya Emery, Bangor’s director of community and economic development. , at a real estate conference. Thursday. Many existing spaces date from the 1970s.
“Zoning is being expanded into commercial areas for light industrial use,” she said. “But there are limited opportunities for industrial space without new construction.”
It’s part of a trend that hit Bangor later than other parts of Maine. Greater Portland, Brunswick and Topsham and the Lewiston-Auburn areas are also seeing new construction and an increase in rental and purchase prices for industrial space. This segment of the real estate market has been unaffected by the pandemic, with cannabis operations and warehouse storage demand emerging as two big space consuming factors.
“There’s seemingly no amount that cannabis companies won’t pay to get real estate,” said Justin Lamontagne, broker at The Dunham Group.
Sibley Transportation Inc. of Bangor is looking to add another warehouse to the four encompassing 250,000 square feet it already owns or leases in the city, including the Galt Block Warehouse Co. building on Miller Street, which it purchased the last year. The company stocks a variety of goods, including paper for factories.
If an existing warehouse became available, it likely wouldn’t meet Sibley’s storage needs because many industrial properties are older and the ceilings are too low for the goods it stores, said chairman Marcus Sibley, who is now considering to build from scratch.
“Marijuana makers have taken up every square foot of available space in greater Bangor,” said Sibley, who is the fourth generation to run the trucking and warehouse business.
But marijuana businesses can operate in locations with lower caps, said David Hughes, an industrial real estate broker with Epstein Commercial Real Estate in Bangor.
He didn’t have an estimate of the total amount of space owned by marijuana businesses in the Bangor area, but state licensing records list several businesses with grow facilities on the outskirts of town on Hildreth Street near Hermon and Bomarc Road near Glenburn.
The increase in demand for warehousing space in Bangor began around 2017, with St. Croix Tissue in Baileyville using hundreds of thousands of square feet and recent demand from marijuana companies, Hughes said. There is also more demand to store materials for infrastructure projects and solar farms.
The industrial vacancy rate in Bangor, Brewer, Hampden and Hermon has halved, from 10% in 2014 to 5% in 2017, then to less than 2% in 2020 and less than 1% today.
As investors build industrial space in other markets to rent out, they would need to get $11 to $13 per square foot from Bangor tenants to get a return on their investment. It’s happening in Portland and Lewiston-Auburn, but it’s not happening in Bangor yet, he said.
But owners who build to use the structure undertake new construction. One example is HVAC wholesaler Johnstone Supply, which is building a 30,000 square foot warehouse in Hampden Business and Commerce Park.
A big need is for small industrial spaces of 5,000 square feet or less. Hughes said at least a dozen businesses interested in moving to the Bangor area contacted him during the pandemic, but he had no space to show them.
The situation is not much better for large spaces, which requires him to carefully monitor when an occupant is at the end of the lease.
“I feel like I’m playing musical chairs,” Hughes said. “I fill the space before it is vacant.”