Part II - cont'd
Published Thursday 6th September, 2007
Implications of new office buildings
information provided in last week’s column is that Port-of-Spain will
have to absorb 3.27m sq ft of new office space within the next two
years. That is an increase in supply of about 50 per cent, given that
the existing office stock is about 6.5m sq ft.
that all the new office space is A Class ie prominently located
signature office buildings with secured, covered parking, elevators,
advanced security systems, high-quality construction and finishes.
obvious implication of this is that we could be looking at an oversupply
of offices in our capital city. The details of that oversupply and its
impact are the subject of this column.
But it is
important to note that in uninformed property markets such as ours,
where proper research is seldom carried out, perceptions and/or
expectations can be overemphasised.
contention has to be carefully examined since it is central to our
understanding the capital’s future.
Some critics of
that contention have said that all that is happening is that a new and
dynamic segment of the market is opening up with the erection of these
new buildings. It would indeed be an error to look only at the gross
supply figures since markets really do comprise segments which interact
in certain ways.
contention is based on the fact that the largest occupier of space in
the entire market is the State and its agencies.
need to consider what are the State’s intentions and commitments with
respect to office space in Port-of-Spain.
table listed 2.3m sq ft of new first-class office space being built for
the State. But there is another aspect to the supply of new office space
in our capital since the State has reportedly made commitments to
certain private developers of new offices.
The largest of
the new private office developments listed in last week’s column is in
the Broadgate Place Project to be developed by Transcorp Credit Union at
South Quay. The Prime Minister turned the sod for this project on April
9 this year and during his address, he stated that “...the Government is
supporting the project through the granting (sic) of a head lease of all
the office space in the building.”
statement can be accessed at
is to contain 341,000 sq ft of office space. Additionally, we have to
consider unconfirmed reports that the State might have entered as yet
unpublicised commitments to occupy a large portion of space listed in
the “excluded proposals” in last week’s columns.
On April 5,
2006, the Downtown Owners’ and Merchants’ Association (Doma) hosted its
quarterly breakfast meeting under the theme: Does construction equal
development? Invited speakers were the Housing Minister Dr Keith Rowley
and the executive chairman of Udecott, Calder Hart.
most significant statement made that morning was Dr Rowley’s declaration
that the Government was building all these new offices since they had no
intention of continuing to rent office space in the capital. It seems
that that programme is now well advanced.
occupation of the new offices, the State will be vacating the spaces
they are now renting, as per the minister’s declaration cited above.
projects tabled in last week’s column, we can expect that our capital
will have more than 9.6m sq ft of offices at the end of 2009. If the
State proceeds with its plans, more than 2.6m sq ft of office
space—which it now occupies—will be vacated in the next 27 months as
their new buildings become available.
As a first
consequence, some 40 per cent of the office space now existing in our
capital will become available to rent in that short period.
aspect of this emphasis on the supply-side is the list of excluded
proposals set out in last week’s column. Of course no one can say when,
or even whether, these proposals could become projects.
believe that rental levels for offices will remain the same until
December 2010? Will they be lower? If so, how much lower? If not, why
We would also
point out that lenders who have used existing downtown office property
as security could be at risk of holding “impaired assets” if the rental
values of those decline as a result of the new office buildings.
enough, some of those very lenders who would be exposed by those
declines would have also been financing the new projects.
we examine the implications of probable declines in office rents and
increasing construction costs on the players in the market: developers,
lenders and occupiers.
Afra Raymond is
a director of Raymond & Pierre Ltd. Feedback can be sent to email@example.com.