Posted by Bob Martin

Brit Vitalius, owner of Vitalius Real Estate Group and one of the state’s leading experts on the multi-family housing market, shared his observations and research on this real estate segment. He noted that housing challenges in Portland have brought out tensions in the community, particularly with those threatened by growth. Vitalius said that the combination of forces affecting real estate are challenging the region’s leadership to have a regional conversation about housing. According to Vitalius, these forces are the new tax code; interest rates, condo conversions, local regulations, affordable housing, and NIMBY opposition to development, particularly to proposed affordable housing units.

Using a presentation he recently made to the Maine Real Estate and Development Association (MEREDA), Vitalius detailed the rapid growth in the multi-family market, and observed that he believed that the market may be reaching the high point of the growth curve because he sees some cooling off of pricing. The bulk of the market is comprised of 2, 3, or 4-unit buildings. The median price for this market product in the East End (Munjoy Hill) is $650,000; in the West End, it’s $520,000. “Off the peninsula, it’s $395,000,” he said. Vitalius said that cap rates have remained steady as rents have increased. (The cap rate is a metric used in commercial real estate which reflects the ratio of net operating income to a property’s asset value—divide the operating income by the building’s sale price—and demonstrates the projected annual return on a real estate investment.)

Vitalius also said that the buyers of these properties tend to be varied, but the numbers of out-of-state buyers are less than is commonly thought. He said that the number of projected developments in Portland is much less than those planned outside of Portland. He said that investors outside of the city are much more patient. As the market levels off, he expects rents to remain close to what they are now, but still be affected by housing shortages. Current average rents in Portland apartments range from $900 per month for a studio space, to $1100 for a 1-bedroom, to $1,350 for a 2-bedroom, topped by 3-bedroom space at $1,500. As rents level off, Vitalius said that Section 8 subsidies have caught up with rent increases.

Vitalius said that critical keys to growth in the Portland area include a serious conversation about affordability, solutions to the region’s public transportation problems, and new approaches to the issue of housing density—and building height—in Portland.