'The Invisible Inventory' - Commercial Property Update from Coldwell Banker Bermuda Realty
Article by Coldwell Banker Bermuda Realty
As commercial real estate is one of the island’s leading economic indicators we regularly assess demand and supply trends for this segment of the market and in keeping with the culture of our Company, share this data with our community. At our latest team meeting our commercial representatives continue to report that viewing activity for office accommodation remains robust and the uptick in transactional volume which we noted earlier this year in leasing appears to have maintained its momentum.
Likewise, the appetite of investors for commercial real estate has shown a relative resurgence. Several properties for sale have closed recently with others poised to go into contract. Interest in the remaining inventory is very encouraging as it demonstrates a revival of long term confidence.
Given the incredibly high office vacancy rate, however, which is currently well over
600,000 square feet in the City of Hamilton, this market intelligence is welcome news. The Government’s collaboration with the private sector and related stakeholder groups which has resulted in changes in policy and legislation to stimulate economic growth is starting to produce some dividends. Graham Smith, Commercial Representative at Coldwell Banker Bermuda Realty says, “We are excited about the growth of new companies on the island and the expansion of existing companies in recent months.” Our records indicate that we have rented or placed in contract close to 80,000 square feet of office space this year, which bodes well as annual historic absorption rates average 75,000 – 125,000 sq. ft. pa with peaks during our the height of our market between 125,000 – 175,000 sq. ft. Scott Powell, Commercial Representative states, “We are seeing all classes of office space being rented ...A, B and C with nearly all of it situated within the City of Hamilton. Another encouraging trend that we are beginning to see more interest in larger spaces (4000 sq. ft. – 6000 sq. ft. range) versus the 1500 sq. ft. - 2500 sq. ft. that we have noted in the past few years.”
Brian Madeiros, President and CEO is of the opinion “that for the layperson who works in the city, office vacancy is an invisible issue. If actual vacancy rates were posted on each commercial building in Hamilton, our city users may have more transparency around this economic indicator and perhaps would more readily understand the need to aggressively explore further policy changes as it relates to growing our island and city population. The economic ‘ripple effect’ associated with a growing city population is significant to the private sector who are trying to sustain business models which require greater transactional volume and increased consumer confidence.”This is one of the most significant impacts of the recent ‘America’s Cup’ announcement. Mr. Madeiros continues, “Much of the current office inventory is dated and requires refurbishment. If only half of the vacant accommodation was refurbished and fit out for new tenants at current building and fit out rates, this would result in an economic injection of in excess of $40 million dollars. Occupants in this newly fitted out space could spend well over $300,000 a week on lunches alone.”
Through research and stakeholder dialogue we have learned that recent growth in Bermuda’s business community is much more transient in nature than it has been in the past decade. Quality office space for a small number of executives who reside here only part of the time and residential demand for convenient, city living can be expected to grow. Mr. Madeiros believes that “... commercial absorption rates are not likely to climb as quickly as they are required to in order to more aggressively reduce the current vacancy rate under current conditions. Therefore the “invisible office inventory” issue which impacts property owners, business owners and city users will continue to exist unless further creative solutions can be identified. What else do we need to do to attract new global business enterprises to Bermuda in order to create economic expansion and new job opportunities for Bermudians?”
For further information contact Graham Smith on 247-1824 or Scott Powell on 247-1823