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Puerto Rico Is A Tenant’s Market

Excess inventory providing office tenants with greater bargaining power and wider selection of space


June 6, 2004
Copyright © 2004 CARIBBEAN BUSINESS. All Rights Reserved.

Historically, the island’s commercial real-estate market has enjoyed vacancy rates as low as 2% and 3%. Between 2000 and 2004, however, there has been a glut of office space, which has raised vacancy rates to as high as 8%.

What might seem a bad situation for the local commercial real-estate market, is actually a positive one, especially for tenants looking for a good deal, said Vicente Rios, president of Rios Commercial, a real-estate brokerage firm specializing in commercial and industrial properties.

"Instead of showing my clients two properties, I can show them eight," said Rios, who holds a doctorate in commercial real estate and is one of only six local real-estate brokers with a Certified Commercial Investment Member designation and one of only two with a Society of Industry & Office Realtors (SIOR) designation. SIOR is the leading professional commercial and industrial real-estate association, with more than 2,200 members in 450 cities in 20 countries.

Rios’ list of clients includes local, stateside, and European companies in various industries, including pharmaceuticals, telecommunications, electronics, banking & finance, and retail (warehousing), as well as federal government agencies.

This is the perfect time to be looking for office space, said Rios, whose company generated $2 million in sales in 2003. The average rent for a fully serviced space is approximately $26 per square foot, he noted.

"I know of office-space owners [landlords] who are willing to provide free rent, additional improvements, upgrades, amenities, and even extra parking to seal the deal," said Rios, who on June 7 will open his new office in Hato Rey’s Torre Chardon. "When landlords compete, tenants win."

Rios said that besides the oversupply of office space, the economic conditions of the past few years haven’t helped the commercial real-estate market in Puerto Rico. They have prevented many companies from expanding as they used to. "What was planned to start construction now will continue on schedule, but there are no significant new multitenant office buildings in the pipeline, only owner-built and occupied buildings like those of Banco Popular and R-G Financial in Hato Rey," said Rios.

He said there also isn’t a whole lot of activity going on with industrial properties, except for some pharmaceutical companies looking to expand by establishing new manufacturing operations in other areas of the island.

Still, said Rios, all indicators point to a much better year in 2005, as the real-estate market usually slows down a little during the elections.

"Everybody is forecasting growth for the commercial real-estate market in 2005, as well as an improvement in the economy," said Rios. "We will have to see how an increase in interest rates plays out, but I believe it is going to be a good year."

This Caribbean Business article appears courtesy of Casiano Communications.
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