Ashford W. Meikle, Staff Reporter
Facey
THE CHIEF executive officer of the investment company First Jamaica Investments (FJI), Stephen Facey, says that the current rental rates in New Kingston are too low to justify any development of commercial office space. He also said that the price of construction and interest rates need to fall before the company engages in any additional construction of commercial building space.
"With the improved economic situation in the country, there is an increased demand for office space," Facey told Sunday Business, after the company's annual general meeting on Tuesday at the Terra Nova Hotel.
"However, there has been practically no construction of new spaces and the reason
for that is
the cost of construction, the cost of land and the interest rates which [can't] justify that kind of invest-ment. In order to make it feasible, interest rates have to fall to single-digit numbers [and] until that imbalance is corrected, you are unlikely to see any major developments."
COMMERCIAL SPACE OWNERS
First Jamaica Investments is one of the largest owners of commercial space in Jamaica. At the end of December 2005, its investment properties were valued at just over $2 billion. However, while this represents a 12 per cent increase over 2004, the company argues that this has not kept "pace with the significant increases in replacement and development costs."
The bulk of the company's income comes from a subsidiary company, Jamaica Property Company, which manages some 750,000 square feet of office and residential space in New Kingston, Manor Park, and Half-Way Tree and along the downtown Kingston waterfront. The company has a 93 per cent occupancy level and experienced a 21 per cent growth in revenue in 2005, which climbed to $597 million and accounted for two thirds of First Jamaica's income, which totalled $892 million in 2005, a 41 per cent increase.
Facey also pointed to the need to double rental rates. Currently, the rates in that area average about US$10-12 per square foot, while maintenance costs are a little lower, averaging about US$6-US$9 per square foot.
MAINTENANCE CHARGES
"Typically, in the region, maintenance charges range from US$8-US$10 per square foot and rent, on average, tends (if you take out the New Yorks and Tokyos and Londons) to be two times what the maintenance cost is. In Jamaica, what we have tended to have is a one-to-one relationship. And what that is saying is that rental charges need to double to be consistent. To build a new building in New Kingston, you will find that you would have to rent it somewhere in the region of US$20 to US$25," said Facey.
For its financial year to December 31, 2005, First Jamaica's net profit surged to $2.7 billion, an increase of 73 per cent as a result of the $1.6 billion gain from the sale of its insurance and banking business to Life of Jamaica (LOJ) last year. As part of that deal, FJI received 919 million shares in LOJ, or 24.73 per cent of the insurance company's stockholding. In addition, First Jamaica also received 1.25 million shares of LOJ's parent company, Sagicor, Inc., in addition to US$10.7 million.
