Sabrina N. Gordon, Business Reporter
New commercial space on Winchester Road houses a medical clinic. Outside of the developments on Winchester Road, St. Andrew, commercial construction has been limited. With few properties available for sale, and the high price for office space, businesses have been choosing rentals over purchases.
The commercial real- estate market remains buoyant, characterised by strong demand, local realtors say, but with available space running low; much of the activity is in rentals.
"Demand for commercial real estate has grown over the last two years and we are continuing to see an increase in it," said Andrew Issa, real-estate broker with Coldwell Banker Jamaica Realty.
But according to Valerie Levy, president of Valerie Levy and Associates, supply has not kept up with demand.
"Demand is strong, but there are few available commercial properties, especially in the New Kingston area and its environs."
There is very little land available, she said, in areas where people want to set up business.
High demand plus low prices equal expensive real estate.
Buyers, said Levy, are now paying above market rates for the limited space available.
In fact, the only new development in this segment was Winchester Business Centre, built by Life of Jamaica.
Realtors know space is limited in the business district of New Kingston and its environs.
Realtor Douglas Ebanks, with Richard James and Associates (RJA), says there are some 100,000 square feet of available space in the business district, 20,000 square feet of which, he says, are RJA listings.
Rental space is generally available in 2,000 to 7,000 square foot-blocks, at a price of US$15 per square foot.
unable to say
What the realtors were unable to tell Sunday Business was exactly how much was available elsewhere, and where those properties were located.
Downtown Kingston, for example, has a number of vacant, and some abandoned properties.
But high crime has dampened market enthusiasm for office space in that zone, notwithstanding the bargain prices.
"The biggest problem is today's businesses need to open late, and the location of some of these warehouses does not permit for late openings due to security concerns," said Issa.
Commercial properties vary in price, depending on the location, condition, amenities and features, says Brian Campbell, general manager of VM Property Services Limited.
A commercial building of 4,000 square feet on Knutsford Boulevard in New Kingston, he said, can fetch a sale price of $9,000 - $10,000 per square foot - $36 million to $40 million.
A similar size building on Duke Street - a top-end zone downtown - is more likely to sell for $4,000 -$6,000 per square foot - $16 million to $24 million.
In New Kingston, a 13,000 square foot lot of land with building on Holborn Road can cost up to US$545,000 (J$38 million).
Realtors say the commercial rental market is experiencing a boom, while property sales are down.
Campbell says this may be
due partly to the difficulty in obtaining mortgage to cover more than 50 per cent of the selling price of the property.
Interest rates on commercial mortgage loans are also high, at 18 per cent and more, said the property services manager, which helps to drive the market towards rentals over purchases.
Rental prices range from US$10 - US$15 per sq. ft plus maintenance charges, which, depending on the package being offered, can go as high as U$$10, effectively doubling the rental charges.
Demand is high for small units of 1,000 sq. ft. and less in the main commercial areas, as businesses contract the size of their operations to manage overheads.
For commercial office, prices in the 'storefront' sector continue to rise, selling for US$15 per sq. ft., without maintenance, for New Kingston.
"The demand is high for uptown properties - up to 2,000 sq. ft for commercial/warehouse type spaces - but the demand is not being supplied," said Campbell.
Issa says the available storage space is not entirely suited for the purpose, saying the warehouses were built for manufacturing purposes in the 1960s and later converted.
difficult to manoeuvre
As a result, he said, the roofs are low, loading bays are difficult to access, and the space is difficult to manoeuvre.
To fill the gap, some small strata commercial office/warehouse spaces are being developed island-wide, said the realtor.
"I see a great potential for the development of larger gated warehouse complexes with rental prices running around US$6 per sq.ft.," said Issa.
In the downtown proper, some buildings are derelict but there is a wealth of real estate waiting to be developed and the waterfront provides an added attraction, said Levy.
Security, however, remains a key issue and the reason that real estate investors shy away from the area.
sabrina.gordon@gleanerjm.com
