What A Client Wants: Trends In Commercial Space Leasing
Sue Armfield - Real Estate Agent
With the start of a fresh new year, it’s a good time to take a holistic look at the changing demands and trends in office leasing - in order to plan and to budget more effectively, to make adjustments where indicated and, to generate prosperity for landlords, developers, tenants and agents alike.
Size is Down
Since the 2008 international market downturn, there has been a notable reduction in the demand for office space exceeding 1,500 sq. ft. This coincides with:
a) A continual decline in the number of new offshore companies registering as well as regional entities moving to Barbados
b) The downsizing of existing corporations
c) A negligible demand for unfinished office space, unless landlords are willing to amortize the majority of the fit-out/partitioning costs over the period of the lease.
Supply Exceeds Demand
In former years the demand for all types of office space surpassed the supply. In the more buoyant business environment, corporate tenants were confident about leasing large spaces and investing in their internal fit-out for the long term. Today, there is a growing need for smaller (500 – 1,500 sq. ft.) finished spaces. In addition, there is a return of the demand for serviced office ‘cubicles’ i.e., where the landlord provides finished spaces with shared reception, basic secretarial services, boardroom and kitchenette facilities as well as infrastructure in place to connect telephone and internet services within 7-10 days. The market appetite for B-C Grade offices (typically converted from residential to office / not purpose-built) has shrunk resulting in an oversupply currently.
With the construction of more purpose-built, A-Grade, office buildings, notably in the Warrens area, there has been a tendency for existing tenants to ‘upgrade’ from their older accommodations, leaving B-C Grade offices untenanted for extended periods of time. There is in fact, still a growing demand for A-Grade offices in the Warrens and Holetown districts.
With prevailing caution in corporate thinking, risk has shifted from tenants to landlords. This makes it quite challenging to lease unfinished, new ‘shell’ space without the landlord’s agreement to amortize a large portion of the tenant’s fit-out costs over the period of the lease. However, in the case of new construction, developers/ landlords want tenants to commit to space before breaking ground, hence a shift of the development risk.
Responding To Market Conditions
It may be time to explore upgrading some B-Grade office space into smaller, well-finished units with shared services. For those with larger A-Grade spaces, it may be prudent to take steps to prepare to subdivide in order to take advantage of what the market is offering.
Most would agree that the market is moving through the bottom of the cycle. Yet entrepreneurial developers and landlords who cater to the market’s changing demands, will be well positioned to capitalize as the market improves.
Feel free to give me a call at (246) 262-8504 or email me at email@example.com, to find out what Terra Caribbean currently has to offer or for further information /advice on commercial (or residential) property sales or rentals.