Covid-19 and Portland's Development Future

Cosakita18

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Hi all,

I'm intending this to be a temporary thread to discuss how Covid-19 and it's economic fallout will impact Portland's development prospects in coming years.

I admit I'm pretty concerned, A sharp recession is pretty much a foregone conclusion at this point, and Portland's tourism / retail / food industry has already been hit hard. At this point it seems very unlikely that tourism will return to pre-Covid levels any time this year. Businesses big and small are also going to take time to recover from this blow, and definitely won't be in "expansion mode" for at least a year.

Personally, I wouldn't be surprised if all of the major projects currently in the works (Canal Plaza Tower, 385 Congress, Portland Foreside, Portland Square) are ditched or at least downsized.

Granted, circumstances change by the day, and what we are going through now is nothing like 2008. But as of 3/19 the short and medium term economic outlook for Portland and the country as a whole does not look promising.
 

Dr. StrangeHat

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I don't know if these proposals will be outright ditched, but I can see most developers hitting the pause button. Financing is going to be hard to come by for a little while, especially if there is any commercial/office or hotel aspect attached to it. With most everyone working from home, companies may be more willing to allow that moving forward once this is all said and done. It may lead to a decrease in demand for new commercial/office construction.

I do think Portland's tourism will rebound, though. More people are going to be looking to make short vacations that are drive-able vs. flying somewhere, be that domestically or overseas. That could end up being a boon for a place like Portland.
 

Cosakita18

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I don't know if these proposals will be outright ditched, but I can see most developers hitting the pause button. Financing is going to be hard to come by for a little while, especially if there is any commercial/office or hotel aspect attached to it. With most everyone working from home, companies may be more willing to allow that moving forward once this is all said and done. It may lead to a decrease in demand for new commercial/office construction.
I think that the best case scenario would be for developers to use this down time to secure all necessary planning approval for future projects so they can hit the ground running within a year.
 

markhb

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I'm more inclined to be pessimistic, just because I've seen this before. The last big building boom in downtowm Portland was in the 80's, in what we might as well call the Liberty Group era, and years ago I saw it described as running from Portland's hosting the National Governors' Conference in 1984 until the 1987 stock market crash (that you may have seen mentioned in the news lately). That was the era that gave us One City Center (as well as 2 City Center and the whole conversion of Middle St. to City Center), Portland Square, 100 Middle Street, and the Portland Pier and Central/Chandler's Wharf condos. After the crash and the subsequent passage of the Waterfront Referendum (which I think was November 1987), it came to a dramatic halt and was followed by the desertion of the Congress St. shopping district as from 1987-1991 Benoit's relocated and downsized, Porteous closed their downtown flagship, smaller businesses got the hell out and what had been the state's largest bank (Maine Savings) failed and literally had its doors locked by the FDIC.
 

Max

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It seems inevitable that some or all of these proposals will get shelved indefinitely. If the big proposals get dropped I'll be bummed but even something like the Longfellow Hotel, which was set to break ground next month, I have to believe is on hold. Or even Maine Med's new Congress Street building -- could that be held up? I was under the impression that the garage demolition was supposed to begin in January.

I'm just hoping that projects currently under construction are finished and we don't end up with in-progress sites being abandoned for any length of time.
 

Cosakita18

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It seems inevitable that some or all of these proposals will get shelved indefinitely. If the big proposals get dropped I'll be bummed but even something like the Longfellow Hotel, which was set to break ground next month, I have to believe is on hold. Or even Maine Med's new Congress Street building -- could that be held up? I was under the impression that the garage demolition was supposed to begin in January.

I'm just hoping that projects currently under construction are finished and we don't end up with in-progress sites being abandoned for any length of time.
I live right next to the Verdante project and it's still humming along, as is the PHA Boyd St Project and the Furman Block in Bayside.

In terms of projects at risk of being shelved or dumped...I would say Maine Med is probably the most likely to move forward once this immediate crisis is over.
Portland Square is probably the most at risk, given that it is almost entirely office and commercial space. There definitely won't be a strong demand for office expansion over the next year or two and I would be very surprised if that project moves forward.
USM also could be at risk of stalling or at least downsizing, it all depends on whether construction financing has already been lined up.


So much of this depends on how sharp and how long the coming recession is. What we are going through now is very different from the recessions of the late 80's and 2008 simply because it is driven by external factors. However, it's hard to imagine that things will completely return to normal. Even in the best-case scenario, many small businesses and restaurants will go under, and the economy will take months to get back on its feet.
 
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TC_zoid

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I wouldn't think that any of the hotels under construction are in a rush to finish, especially the Shipyard brew hotel (and its adjoining neighbor, the Covetrus office building). Summer 2020 tourism in Maine will, more than likely, be a disaster--especially Portland's. If you look at the timelines of other flu viruses (2003 and 2009), they don't begin to significantly wind down for at least a year. But I do think some of Maine's more outlying attractions, such as lake cabins, campgrounds, and B&B's in small towns, will see some visitors. Crowds will be avoided. I can't see OOB and Acadia Nat. Park at anywhere near last year's count.
 

cneal

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Projects being built now have construction loans that are contingent on being paid off with permanent loans on a specific timeline, so unless banks start collapsing (which is certainly still a possibility!), they'll need to finish construction more or less on schedule.

I do think that these expensive condo developers are going to have considerable trouble finding buyers once their buildings are finished, but those guys still have an opportunity to lease their unsold units as more affordable rental apartments, which the city still needs more of. And it would be great if one or more of the approved hotel projects were to pivot to a lodging house business model instead.

People tend to forget this, but apartment buildings were full and kept on making money in the wake of the great recession: when lots of people lost their mortgages to foreclosure, demand for rentals became very heated. When it all shakes out, there's still a shortage of housing here, and Portland will still be the center of whatever's left of the state's economy.
 

Cosakita18

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Looking big picture, I think residential development (particularly rentals, as you said) have a strong future regardless of how long this economic crisis persists. One of the largest long-term changes to come from the Covid crisis will probably be a more widespread switch to work-from-home policies for a lot of companies. This could make Portland even more attractive to transplants from Boston / NYC.

That being said, I do feel that most of the projects in the development pipeline right now won't proceed (At least not in their current form) . Regardless of what happens long term, It does increasingly seem like Portland will have a 6 month - 1 year period where virtually no new construction is taking place. Most indications now show that the best-case scenario is short but sharp recession lasting into the 3rd or 4th quarter of this year.
 
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Cosakita18

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It seems like all construction site downtown and in the East End are still humming along, including the long-delayed Covetrus / Cambria hotel site, which seems to be picking up speed as of late. I'm hopeful that Portland doesn't follow the lead of Boston and Cambridge and put a freeze on construction sites.
 

Element4

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Hello. First post here! I'm working at Hobson's Landing and Consigli Construction informed us that project will continue "full speed ahead". Most of the other builders I work for are all saying the same thing, including MA and NH builders.
 

Portlander

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Thanks for the update and welcome to the forum Element4.
 

PortlandArch

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construction financing thats in place shouldnt suffer but long term perm debt options may be impacted (completion of projects underway is unlikely to be in jeopardy, but their longr term viability is in question). that said some cities like boston have halted all construction irrespective of financing considerations as a matter of public policy.
 

Cosakita18

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Thanks for the perspective and welcome to the forum, element4!

Is phase 2 "shovel ready"? I remember during the master planning process the developers intended to build phase 2 almost immediately once phase 1 has completed
 

Seanflynn78

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Is phase 2 in the rendering on this page? Or is that what is already under construction?
 

Max

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This early rendering includes the proposed full build-out. Currently the building in the center and the hotel on the right are under construction.


 

Max

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The Press Herald published a brief update on construction activity in the state. Sounds like most projects currently underway are moving forward cautiously, although I found the point about interior work interesting: that work generally requires much closer proximity than the exterior work.

In addition to whatever impact the greater overall economy has on projects in the Portland area in the near future, there's also the fact that City Hall is basically closed to the public for the next month. I don't know whether they can/will process plan and project requests while City Hall is closed, but I've noticed very little activity on the Self-Service portal over the last couple weeks.
 

Joshua Chamberlain

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Hi friends! Long time reader of the forum but first time contributor (also). I have enjoyed reading the forum for the last few years and share in the enthusiasm many of you have in the prospect of building an amazing city that we all love so much.

Full disclosure: I work in the sales of building materials, supplies and tools so the majority of the contractors and subs referenced in the forum are customers of mine. I have a working relationships with many PMs and supers. My support for the Maine development community is not solely based on its impact to my professional career, but also because I am a lifetime Portlander with a great passion for our community.

With that said, my experience with the subcontractors on many of the Portland job sites has been VERY mixed and critical of each other. Some select subs are pulling all of their employees off job sites for two weeks and the general contractors furious. Then there are more labor intensive subs like drywallers and interior finishers who can not afford to stop work. They make the majority of their money on labor and not on the up charge of the systems they are installing. There are no uniform guidelines on how to handle this pandemic on a job site and it shows. I could be critical of a NOTORIOUSLY SAFETY CONSCIOUS contractor with multiple projects downtown but i'll keep my mouth shut ;)

Obviously there are huge construction loans that will untimely dictate the future of these projects. If things get worse it will be interesting to see what lenders or equity investors jump in to bail out the developers and grab a chunk of their equity. I will take a guess and say we will see several lawsuits 6 to 12 months from now.

What type of construction should be deemed essential or not is a conversation I could go on forever about.

Cheers!
 

Portlander

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Max, I think future projects that were in the pipeline or on drawing boards will be at the mercy of how long this pandemic plays out. If the economy suffers beyond the summer months I think it will be extremely detrimental to not only Portland, but will it impact projects in every city across the country. Welcome to the forum Joshua Chamberlain, your hands on knowledge of the construction business and passion for Portland will be an excellent addition.
 

mainejeff

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I think that the days of ridiculously priced hotel rooms on the peninsula are gone for now.
 

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