leased (rented) is low compared to prevailing building and development costs, the market will not invest in new builds. For the most part, this scenario has been the experience in the real estate market in New Kingston and many other prime business district locations over the past ten years. Notable exceptions have been in the Bogue/Fairview area in Montego Bay and at the Ocho Rios By-pass and Milford Road intersection in Ocho Rios, where enterprising developers have used building systems type ‘tilt-up’ construction to lower the cost of construction and developed a modern low-rise commercial business district, attracting favourable rents and strong market demand; as well as a major development called Whitter Village in Ironshore. As rents rise closer to US $17.00 -US $18.00 per square foot per annum, the economics on high rise building sites will improve, and developers should respond accordingly. Without high demand and high prices, investors cannot afford to develop and invest in high rise buildings. Rents and demand for prime residential properties in St. Andrew had been improving significantly for around ten years up to the year 2008 and the supply from new construction and development, especially in the top end of the residential market, had been catching up with this demand. However, with stagnation in the economy over the past four years, we have been experiencing a Buyer’s market in some locations with a balanced or seller’s market in only particular market segments. However, rents and demand for prime commercial real estate, for example in the New Kingston area, actually declined in some instances earlier in this decade, then trended upwards up to three years ago and is now appearing to be flat, or on the decline for some locations and market segments.
Despite these trends, rents and demand for prime commercial real estate in New Kingston and other prime business centre locations are not yet at a level high enough to stimulate investment in high rise purpose-built office buildings. Until this threshold point is achieved, we will continue to see little or no new developments in these prime commercial centres. One recent major commercial property investment in Kingston was the Digicel head office building in Downtown Kingston , which in part was influenced by the tax incentives offered by the Government of Jamaica for regeneration of properties in downtown Kingston under the Urban Renewal Tax Relief Act (1995). It is unlikely that this development would have proceeded without the existence of the tax incentive. It is likely that while returns/yields remain moderately low for alternative investment media, investments in real estate will continue to increase, as investors seek to diversify their portfolios into the property market for security of capital. The types of investment that are likely to meet the portfolio manger’s risk assessment suitability profile will be defined by the status of the demand and supply balance in the marketplace.
By Edwin D. C. Wint Chief Executive Officer La Maison Property Services Limited
Places & Spaces
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