Hope amid the gloom as Port Authority confirms new cruise visits
Hope is on the horizon for struggling George Town retailers with a surge in cruise arrivals expected over the next two years.
The amount of empty retail space beyond the waterfront in downtown George Town has increased during the past five years, as cruise passenger arrivals have plummeted.
Class B properties – anything one street back from the ocean to just beyond the post office – have been worst hit by the decline in cruise tourism, according to market analysts.
Cruise arrivals have fallen from nearly two million in 2006 to a predicted 1.4 million in 2013, coinciding with a crash in property prices and a sharp increase in empty stores in the capital.
Good news could be on the way, however, with the Port Authority of the Cayman Islands confirming several new cruise arrivals in 2014 and 2015 that officials say will see passenger arrivals back up to 1.8 million, near peak levels, for those two years.
Carnival, Norwegian and MSC have all added ships to the Caribbean route, calling in at Grand Cayman.
The news has been welcomed by business owners in George Town who acknowledge the impact of declining visitors on economic activity, most clearly seen in the increasing number of empty retail properties.
Prime slots on the waterfront have held their rental value and maintained occupancy at 100 per cent, according to IRG investment and leasing company, which keeps a database of every commercial rental property in the Cayman Islands. But you only need to go one street further back to see how hard the town has been hit by the loss of 500,000 cruise passengers.
The price of renting class B retail space, anything outside of the main waterfront, Fort Street and Cardinall Avenue, has come down dramatically since 2008. Properties that used to go for $70 to 80 per square-foot are now available for half that price.
In spite of this, the amount of empty, unrented space in this category rose from 5,500 square-feet in 2008 to around 10,000 square-feet in 2013. Figures aren’t collated to show the exact number of properties this represents but IRG says it is 10 per cent of the available space in this category.
The construction of a new port would likely trigger a rebound in the market, provided there is no additional retail development, according to IRG’s Ollie Collins.
“Class A rents have held their value and we would expect them to increase once the port is built. We do a lot of work with the jewellery shops and we have investigated this in other parts of the Caribbean.
“We would expect rents for that prime retail space to increase by 50 per cent at a minimum. In other areas, when a port has been built, the number of passengers has increased and the average spend has increased. This could help the George Town economy substantially, provided that no retail area is built with the new port,” Mr. Collins said.
He said class B rents would be expected to recover their 2008 value and occupancy rates once the port is built.
Relief could be on the way sooner than expected for downtown property owners. The Port Authority has confirmed several new calls, from October of this year.
It is still anticipated that 2013 will be the worst year in over a decade for cruise arrivals, with 1.4 million passengers expected for the year.
Joseph Woods, manager of cruise operations and security at the Port Authority, said things would pick up from October.
He added: “According to the bookings that we already have, things are looking really good for the next two years. We knew this year was going to be a lull, but right now we are looking at things picking up to nearer peak levels in 2014 and 2015.”
Carnival is adding Carnival Breeze and aCarnival Dream, MSC is sending the MSC Divina and Norwegian is adding the Norwegian Epic to their regular Cayman visitors. Mr. Woods said this would likely mean passenger arrivals of around 1.8 million.
Robert Hamaty, of the Association for the Advancement of Cruise Tourism, added: “There’s a big boost coming for 2014 and 2015 for ships that have been diverted from under-performing European routes.”
But he believes it will take the completion of the new berthing facilities and the guarantee that the larger Genesis style ships will dock in Cayman in future years, before the town sees a real rebound in fortunes.
Mr. Hamaty, president of Tortuga Rum Company, added: “There is still a lot of empty space, a lot of people have closed their businesses. If things pick back up, I don’t know how quickly they could reopen or get reorganised.
“I used to have six locations in George Town, now I am down to three. Some people have been able to hang in there but it has been a very difficult period and we are relieved there is good news coming.”
In an earlier interview, Gerry Kirkconnell, managing director of Kirk Freeport, said business owners would probably wait to see the pier being built before they committed to new enterprise in the town.
He said there was significant interest in some of the vacant downtown properties and Kirk Freeport would also look to expand its own presence at the Bayshore Mall, if the pier went ahead.
But he believes businesses are cautious about guarantees over the timing and will wait until construction is well under way before they move on any new development plans.
“People are probably going to wait, because we have been waiting for so long and hearing for so long that this is going to happen. This has been talked about for more than six years, so people won’t take the risk until they are sure it is actually going to be built.”