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Developers search for solution to Hamilton’s vacant offices

Real estate agents point to knock-on effect of ‘flight to quality’
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by Tim Smith

Landlords are offering incentives such as rental holidays as they grapple with a glut of vacant office space in Hamilton.
Penny MacIntyre, of Rego Sotheby’s International Realty, said upgrades are also being made on non-prime properties which have been overlooked while business tenants opt for glamorous waterfront locations.
Brian Madeiros, of Coldwell Banker Bermuda Realty, meanwhile, said some vacant properties are ripe to be converted into homes for overseas workers – as long as the Government’s policies line up with such a move.

Penny McIntyre of Rego Sotheby’s International Realty

Ms MacIntyre said Class A+ and A properties such as Point House on Front Street and Waterloo House on Pitts Bay Road are in high demand because of their waterfront views, modern interiors and top-class amenities.
There is less interest, however, in the city’s older buildings, including those on Reid Street, Church Street, Victoria Street and side streets, which have mainly cityscape views, dated interiors and a shortage of natural light.
“Prospective tenants include both new-to-Bermuda and businesses with existing local offices looking to relocate, resize or upgrade their offices,” Ms MacIntyre said.
“These prospects tend to look for newer interiors and spaces that require less reconfiguration or easy to adjust layouts for today’s ‘right-to-light’ seating plan where international companies especially seek to place meeting rooms to the interior and employee seating and meeting rooms on the periphery to have access to more direct natural light.”
She added that some tenants of older buildings have terminated their leases since the Covid-19 pandemic, as firms have amalgamated or closed operations, while employees have switched to remote working.
Ms MacIntyre said: “The growing vacancy and the lengthening times non-prime properties sit on the market are resulting in landlords’ willingness to consider either free rent periods, potentially reduce rent during renovation periods or contribute to or install interior improvements such as new carpeting, LED lights, fresh paint and some cosmetic updates such as bathrooms or kitchenettes.”
Mr Madeiros noted the “flight to quality” in recent years means Class A office space is now practically fully let.
He said: “In Bermuda, because a lot of our office space is actually dated, we find that when there is a new development, purely because of the nature of our international business, it attracts a lot of attention. We have excess demand of this lovely, high-quality space.”

Brian Madeiros, president of Coldwell Banker Bermuda Realty

But he said there are challenges finding tenants for an estimated 300,000 square feet of vacant secondary office in Hamilton.
“One might say, what do landlords need to do in order to fill that accommodation?” Mr Madeiros asked.
“No landlord is going to invest money into an older building if they don’t feel there’s demand for refurbished secondary. Landlords need to understand who their end user is if there is one.
“So that speaks to the Government’s strategy to increase our working population. If we do, then we might see landlords with a risk mitigation strategy around refurbishment feel more comfortable refurbishing or redeveloping these buildings.”
Mr Madeiros said there may be interest in creating developments comprising retail, office space and residential accommodation.
“With this hybrid, the developer needs to have some form of comfort that they can either rent or sell pieces of this development as residential or commercial condominiums in order to make their financial model work,” he said.
“The problem is if we are going to be increasing our working population with work permit holders, we’ve had a number of instances where they’ve said we can’t find rental accommodation, we would like to commit and buy a condo, high-end, and we want to be in the city.”
Mr Madeiros noted work permit holders cannot purchase high-end condos in the city.
“This is a risk to any developer who flies into Bermuda,” he said.
“These individuals would love to live in the city but they can’t, so you don’t have that market to sell to.
“I think the policy makers have some further exploration to do around this area.”
Ms MacIntyre said that developers have been considering the merits of changing a handful of office buildings into residential or mixed use with office, residential and retail occupants.
Such moves are subject to planning approval – but could potentially help rejuvenate Hamilton.
“Bermuda is certainly in need of more residential rental inventory,” she said. Residential construction in Hamilton could help to bring more people to restaurants and bars that have suffered from the impact of remote work, she added.

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