Positive signs in commercial office market
Rego Sotheby's International Realty says its commercial practice has seen a number of new businesses relocating to Bermuda and seeking to set-up operations.
In her Commercial Report for October realtor Penny MacIntyre said tenants are still spoiled for choice with “record high office space inventory” in Bermuda.
However, “Our Commercial practice has experienced a number of new businesses relocating to Bermuda and seeking to set up operations with staffing from six to 12 employees over the next six months and also larger interests searching out up to 16,000 square feet of central, Class A space.
“The activity demonstrates there is a gradual increasing demand for small, quality blocks of space within central Hamilton and re-gentrified western-end into Pembroke along Pitts Bay Road.
“These prospects are entering into three to five year leases with renewal options and continuing to negotiate for build-out concessions plus free-rent periods.”
Ms MacIntyre, executive vice president of the realtor, noted approximately 100,000 square feet of additional space has come onto the open market over the last 12 to 14 months. The increase was in part triggered by the marketing of soon-to-be available spaces as tenants began to migrate from their current offices into newer spaces such as 141 Front Street and September's newly opened waterfront offices at Waterloo House on Pitts Bay Road.
She continued: “As reported by The Royal Gazette in September, George Hutchings, Chairman of Association of Bermuda International Companies (ABIC) concluded job numbers in international business had been in decline since 2007 with an estimated job loss of at least 5,000 jobs in our economy overall since 2008 largely because of the reduction in the international sector.
“That's 5,000 desks or offices vacant, which in average space terms is roughly the equivalent of 875,000 square feet unused. Or in visual terms, imagine Front Street from Queen Street to King Street vacant.”
The increasing selection in existing office spaces competing with sublet rental units both on-and-off market continues “to apply tenant favourable pressure on rental rates”, she said.
The average asking base rents for Class B office space ranges between $32 to $49 per square foot subject to the condition and location of the space.
These figures are slightly off the $35 to $55 per square foot average asking base rents for the same period last year.
At the office market's highest end, Waterloo House's brand new waterfront construction has only a single contiguous 9,972 square foot space left and is currently under negotiation.
“That unit listed on the market with a base asking rent at $80 per square foot (add in taxes, service charges, water and excluding tenant electric, the gross rent would be upwards of approximately $115 per square foot) for the Class A+ space,” she said.
Ms MacIntyre continued: “Bermuda's Government continues to strive towards a “more welcoming environment” with its recent legislation approval of The Incentives for Job Makers Act 2013 ...”
She added there is also “a noticeable increase” in hotel / tourism interests, pending transactions and closed deals.
“From our successful engagement on the sale of the former Sonesta property known as South Beaches Development to our listing transaction work on Pink Beach Club and Nine Beaches plus our ongoing marketing of the coveted South Shore hotel properties — Coral Beach Club and Horizons — our Commercial Hotel/Tourism practice has entertained several local and international interests within the first nine months of this year,” she said.
“We continue to conduct effective bidding procedures to vet viable buyers and/or leasehold interests and are pleased to report Bermuda's available hotel/tourism inventory is once again appealing to developers and owners alike locally and on the world stage.
She said that while recent reports indicate the current unemployment rate is at 12 percent, some economists estimate the figure will continue to climb to 14 percent by the end of 2014.
“This projection means the commercial office market is not out of the woods anytime soon but we hope to see positive influences from anticipated new hotel/tourism products and the gradual uptick in new businesses setting up operations in Bermuda,” she said. “The activity in both sectors now are the beginnings of the groundwork towards encouraging both visitors and business persons alike to consider Bermuda as a place for rest, work and play.”