Heralding the completion of construction on their new buildings, the homes of Walkers and Appleby law firms are up for lease.
The two projects together will increase the amount of vacant commercial leasing space in Grand Cayman by 20 per cent, according to leasing agent Ollie Collins of IRG.
Walkers’ move to its new building on Elgin Avenue will free up 60,000 square feet of space in its two existing buildings, which are linked by a corridor. Walker House is the largest space available in downtown.
Walkers’ new building is about 80,000 square feet, Mr. Collins said. The building has been substantially complete for years, but the law firm’s move-in date was pushed back due to problems with the building’s smoke ventilation system and ensuing wrangling over costs, sources have told the Caymanian Compass.
“They will be moving out by the end of January to their new building,” Mr. Collins said.
Walker House was constructed in 1998 with an extension in 2001 and the most recent update in 2004 after Hurricane Ivan. Mr. Collins said each floor has 10,000 square feet and can be split into 2,500-square-foot quarters.
“It’s a landmark site in George Town. It has a very sort of classical design. Buildings really aren’t built like that anymore,” he said.
Just up the road from Walker House, construction is nearly done on the new Appleby Tower, which at six storeys will be the tallest building in George Town. Each storey is slightly more than 5,000 square feet, with the top floor containing meeting rooms.
The fifth floor of the tower will be sublet, with sub-lease periods tentatively starting in January. When the tower is finished, the three-building complex will be rebranded as Appleby Centre. Sub-leases can start immediately in the three-storey “Appleby South” building, which has about 15,000 to 20,000 square feet of available space.
Appleby’s first building was built in 1970 with a renovation in 2002, Mr. Collins said.
The owner of Walker House and Appleby Centre is Acorn Properties Ltd.
When Walker House and Appleby South were new, they were classified as “class A” commercial space. Now, they’re being considered as “class B-plus”, Mr. Collins said, because at their age they can no longer command class A rental rates (like new buildings at Camana Bay and Cricket Square do), although they have amenities such as generators and parking, and are fully fitted out including furniture.
“Both of these spaces are of better quality than other class B space on the market. We see it, and tenants see it, as an opportunity to lease these spaces at a lower rate than what was possible before,” he said. “They are almost 50 per cent cheaper than leasing at Camana Bay, for example, but you’re still getting all the services and quality of a top office space in George Town and at a considerably better cost.”
Mr. Collins noted both buildings made it through Ivan with minimal damage, and that although they may not look particularly elevated, the slab level in the Mary Street area is about 8 feet above sea level – 4 or 5 feet higher than the natural elevation of Elgin Avenue, for example.
Grand Cayman has about 400,000 square feet of available commercial space for rent, not including Walker House and Appleby Centre, Mr. Collins said.
“The general commercial market has seen improvement in the last 12 months,” he said. “The absorption rates have increased compared to 2010 and 2011.”
During the past few years, new class A buildings have forced older class A buildings into the class B category, which in turn drops the older class B buildings into the class C category. The overall effect has been an increase in average class A rental rates, but a drop in average class B and C rental rates.
According to statistics from Mr. Collins, the total amount of class A space is about the same today as in 2007, while the amounts of class B and class C space have grown substantially. Overall commercial space has grown from 1.5 million square feet to 2.6 million square feet. Base rent rates of class A space have increased by 20 per cent over the time. Base rent rates of class B space have declined 7.5 per cent, and base rent rates of class B space have declined 25 per cent.
“We don’t expect to see a drop that big over the next couple of years, but certainly there is downward pressure on rents, with the amount of space on the market,” he said.
Mr. Collins said the vacancy rate in class A space is under 5 per cent.
“That’s very healthy when compared to other major cities, which is really what we compare our commercial market to,” he said.
The rental rates for class A space in Grand Cayman are on par with rates in midtown Manhattan and London, and there the vacancy rates are above 5 per cent.