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Downsizing in a downturn: Jamaican companies reduce real estate footprint

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Working from home or remote working will reconfigure the look of leased commercial space for some time to come.

Michael Neita, CEO, Victoria Mutual Property Services Limited, recently told Caribbean Business Report that from the perspective of what is happening in that company’s property portfolio, the increasing trend in work from home “will slow the near-term growth in the total commercial office space offerings…[to] businesses that can facilitate remote working”.

Michael Neita, CEO, VM Property Services Limited, talks growth and resilience at the 2021 VM Group Business Conference held virtually on Saturday, January 9, 2021. (Photo: Facebook @VictoriaMutual)

He made his comment in response to a query on some notable relocations among Jamaican companies. 

“It (work-from-home) should not result in a net reduction in the rental space offerings, neither will it result in a reduction in the rental rates for prime office space. It may also spur the growth of short-term rentals in flexible office spaces that will be available to remote working employees of small and medium-sized enterprises,” Neita explained.

Downsizing in an downturn

In some cases, it is reduced economic activity, not simply work from home, that has resulted in company relocations.

In May, Main Event Entertainment Group Limited announced plans to relocate its corporate offices from 70 – 72 Lady Musgrave Road in the Kingston Metroploitan Area.

Management advised that of the change of address of the company came into effect on May 15, 2021. The new address is now Unit 2, Ardenne Emirates, 7-9 Ardenne Road, Kingston 10.

Launched in 2004, Main Event is no stranger to moving house in line with its operating needs. The company’s operation was first housed at 18 Annette Crescent with 2,500 square feet and a staff complement of six people. With an ever-expanding clientele, other companies were born, including M-Style, a division in Montego Bay.

Before March 2020, the company had a staff complement of 200-plus employees and contract workers while operating from Lady Musgrave Road with offices also located in Barbican, Newport West, and Montego Bay.

However, Government measures, under the Disaster Management Act, to encourage social distancing and implement nightly curfews, due to the coronavirus pandemic, have resulted in a dormant entertainment sector.

At year end December 31, 2020, profit declined by 119 per cent to JM$115 million. And for the first quarter ended March 2021, management said that the COVID-19 pandemic continues to impact business activity and performance. 

CEO Solomon Sharpe, in response to Caribbean Business Report queries, revealed that the permanent staff count is now 65; eight are currently laid off, making 57 active.  Approximately 200 contracted persons are out of work until event-planning activities resume. 

CEO of Main Event Entertainment Group Solomon Sharpe (File photo)

The lease on the premises at Lady Musgrave Road was scheduled to expire May 31, 2021, so the company opted not to renew. Main Event currently occupies two properties at Ardenne Road — one of which is owned and the other leased.

“Both premises can accommodate our staff previously housed at Lady Musgrave Road,” Sharpe said, adding: “The company also continues to occupy three warehouses located at 2 Seventh Avenue, New Port West, Kingston 15, which houses our operations, staffing and equipment.”

Pulling up stakes

Lottery and gaming company Supreme Ventures Group relocated offices during 2020 in order to cut costs as the pandemic cramped the gaming instincts of clients.

Operations manager within the group, Dennis Chung, noted that this company is not alone.

“Many have been forced to find cheaper spaces due to the pandemic. Others have reduced their footprint as their operations require less staff and more integration of technology. Agents are primarily on the road and are working from home in many instances.”

In a decision taken in 2019, the Supreme Ventures Group consolidated its head office operation with its property at 9 Retirement Crescent. The square footage of the Retirement Crescent office is 9,000 sq feet, compared to 11,000 sq feet at offices previously occupied at Sagico Group Jamaica’s headquarters in New Kingston. 

The Sagicor Group Jamaica building in New Kingston (File photo)

With this relocation, Chung, CEO of Supreme Ventures Shared Services, said that the group has saved approximately JM$50 million annually, and with the continuous focus on improving workspace efficiency even more value-added is expected. 

He told Caribbean Business Report (CBR) “The move was part of the Company’s focus on improving its operating efficiency ratio through strategic cost management.”

Meanwhile the company has still maintained, but, Chung stated, “We recognized not only the potential savings from moving into our own premises, but also the opportunity to bring several operational departments under one roof for greater cohesion and engagement.”

CEO of Supreme Ventures Shared Services Dennis Chung (Photo: Jamaica Observer)

According to the manager, the group also successfully implemented a robust work-from-home programme that was in the pipeline since 2019. 

“We were an early participant in the movement towards the ‘new normal’ and the ‘new office space’ where adequately equipped and technologically savvy team members can work remotely from home or any location of their choice. We are an equal opportunity employer and an employer of the future that understands that team members can operate anywhere in the world and still be efficient and effective,” he added.

Chung pointed out that  90 per cent of team members have the ability to work from home. For its offices, the company ensures that the COVID-19 protocols are observed, and the human resources team continuously reminds the wider group of those specific actions. Sanitisation has increased and sanitisation stations are easily accessible throughout the building. 

Chung concluded, “The Supreme Ventures Group is encouraged by the results of this strategic direction, particularly in the face of the challenges raised by the pandemic.  With an accelerated expansion and growth strategy, the need to maximise the use of office space and more effectively streamline workflows became even more critical. By incorporating technological solutions and new processes, the company has been able to create a successful work environment that extends beyond the physical parameters of the traditional corporate office.” 

Commercial movements

Orandy Movers, which has a large commercial moving market share, has indicated that commercial moves have reduced by half since March 2020. Oral Williams, CEO of the company, said that most movements observed in 2020 were companies relocating to smaller properties that they already owned.

(Photo: www.orandy.com)

“A lot of them move into new places as was pre-planned before COVID. We are currently doing the Ministry of Foreign Affairs [and Foreign Trade], which is relocating downtown. It’s their own new space [in which] they have relocated. For others, I am assuming that it is because of the downturn why smaller office space is selected.”

Williams said there has been an uptick in business since the start of 2021 and that he believed many who were previously in a wait-and-see mode might begin moving again. For now, however, he said, “People are not too optimistic. They are hoarding their money.”

Michael Neita, CEO, Victoria Mutual Property Services Limited told CBR said that , from the perspective of what is happening in  that company’s property portfolio, “Companies make choices based on their current rental location and commercial terms vis-a-vis the locations and terms for newly constructed or recently vacated rental properties. In addition, some companies develop and build their own commercial properties that they eventually move into, thus creating new locations for their operations, and new rental space for other entities.”

He stated, “We have experienced some of this movement, with a long-standing tenant finally completing construction of their commercial office space and vacating our rental property. The space was then leased to a new Grade A tenant who will occupy the space soon. This is normal activity in the commercial office space market.

“Companies move for various reasons, the need for additional or less office space, the need for newer or upgraded office space, to change the location of their operations and also commercial terms of their tenancy.”

Neita stated that he believed work from home will become a significant factor in the Jamaican employment landscape going forward. 

He concluded, “It will probably mean that a significant number of employees who would normally work from commercial office locations will work remotely. The estimates range, depending on the type of operations, anywhere from 20 per cent to 70 per cent of the staff complement.”