The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading realtor yesterday said the vacancy rate in the ‘second tier’ commercial property market could be slashed by 50 per cent if his company is able to close another 50,000 square feet of leases “on the books”.

Larry Roberts, NAI Bahamas Realty Commercial’s chief executive, told Tribune Business his firm was “pretty busy” dealing with tenants seeking space in ‘Class B’ properties, having negotiated a “record” 31 leases in 2014 for a total 101,359 square feet of commercial property space.

Combining this with the leases that NAI is working on, Mr Roberts said taking 150,000 square feet of space off the market would likely reduce ‘Class B’ vacancy rates from 20 per cent to 10 per cent.

He added, though, that the top-tier ‘Class A’ commercial real estate market was “a huge, huge challenge” despite NAI enjoying some success in leasing properties such as the UBS (Bahamas) annex buildings on East Bay Street.

And Mr Roberts also held up the lease his company concluded for the Ministry of Agriculture, Marine Resources and Local Government in The Island Traders Building as a model for how the Government should approach its real estate portfolio going forward.

Rather than be plagued by cost overruns on new government properties, which it then often failed to maintain, Mr Roberts said the current administration - and those to come - would create better value for taxpayers by selective leasing.

“We’re working on a fair number of things, so we’re encouraged,” Mr Roberts told Tribune Business of the commercial property market’s 2015 prospects.

He added, though, that it was ‘Class B’ - rather than the top-tier ‘Class A’ properties - that were giving him cause for this optimism.

‘Class B’ properties are typically slightly older and do not have the same level of fittings as their more modern ‘Class A’ counterparts, Mr Roberts describing Scotiabank’s Rawson Square head office and Centreville House as two examples of the former.

“Class A is a huge, huge challenge,” he disclosed to Tribune Business, while acknowledging that NAI had managed to “lease a lot of space” in the UBS annex building to the point where it had “very, very good tenants” and was “almost full”.

Yet for several years, Mr Roberts said the Utilities Regulation and Competition Authority (URCA) had been its only major tenant.

Turning to the Bahamas Financial Centre, another ‘Class A’ property that is owned by the BISX-listed Bahamas Property Fund, Mr Roberts said the vacancy rate there - which has consistently hovered at around 25 per cent - had now risen to around 30 per cent as a result of FINCO’s departure.

“We are trying to help tenants in there [the Financial Centre] sub-let, so it’s not only landlord space but tenant space,” he explained.

Mr Roberts added that the Charlotte Street-based property had always been considered a top ‘Class A’ building, but it was being impacted by financial services industry downsizing and institutions moving out to western New Providence.

“The future in Class A does not look a pretty picture, but Class B is pretty busy and that’s extremely positive,” Mr Roberts told Tribune Business.

“We’re busy on some other leases. We’ve got at least another 50,000 square feet on the books. For us, it’s looking very positive and that, of course, affects the market tremendously.

“You take 150,000 square feet right off the market. We were running 20 per cent vacant in Class B properties, and now we’re looking at about 10 per cent.”

Mr Roberts said that securing the Ministry of Agriculture as a tenant in the Island Traders Building on East Bay Street had been “a hell of a good deal for the Government”, and helped NAI get the property 100 per cent leased.

“As a Bahamian, they [the Government] are much better off leasing something like that,” he added. “They get a damn good rate, and we got a good deal because we got a tenant.

“That building was 70 per cent vacant. The Government does pay their bill, we have a good, solid tenant, they got a great rate, and we did the fit out.”

Calling for the Government to lease, rather than build and own, its real estate, Mr Roberts told Tribune Business: “They should do that and stop building these properties that cost two-three times’ what they’d estimated, and then they don’t maintain them.

“The public’s money would be better spent. The buildings they’ve let go, it’s a blight for the country. They don’t maintain them. If they would lease and not buy, they’d be much better off.”

Mr Roberts identified the Post Office building and Rodney Bain Building as two government properties that needed to be “torn down”, while Bolam House had been “left wide open” by the removal of windows, and exposed to salt air and other elements.

NAI’s 2014 transactions included office, retail and warehouse spaces. While the vacancy rate in ‘Class B’ properties had come down, those in Class A were still seeing new interest despite the ever-increasing regulatory pressures on the financial services industry.

“We are extremely pleased to have experienced an uptick in demand for commercial leasing services this year”, said Donnie Martinborough, a director of NAI Bahamas Realty Commercial.

“The fact that there has been an increase in demand, even as the Bahamas’ commercial office market remains somewhat flat, is a testament to the expertise and talent of the NAI Bahamas Realty Commercial team.

“We are seeing a slow but steady rebound in commercial real estate, signalling growing opportunities for companies in this market.”

NAI said its key lease transactions include the URCA offices at Frederick House; the new Itau Bank location in the UBS Annex; Carabongo taking up the old Sbarro’s location on Bay Street; and the Lukka Kairi restaurant to be located in Beaumont House, Bay Street, overlooking the Nassau Harbour.

“The improving economy and outlook for the commercial real estate market continues to create new opportunities for our clients, and we are optimistic about the commercial real estate sector moving into 2015”, said Donnie Martinborough.

NAI has added Michelle Martinborough as a full-time commercial leasing and sales associate.