Strong demand for top-end office space

If office space is any barometer of the health of the white-collar economy, then Cayman is doing just fine.

There is currently nearly 3 million square feet of space given over to offices – the highest in Cayman’s history. Almost all of the high-end “class A” space is taken, according to a new report. At the other end of the spectrum, though, there are plenty of empty offices in the lower price bracket, particularly in George Town.

The authors suggest the fact that plush new offices in Camana Bay and Cricket Square have filled up shows that Cayman’s financial services industry – the target market for that type of real estate – is doing well.

The market update report, produced by Coldwell Banker and Integra Realty Resources, also looked at retail space in Grand Cayman and found a relatively healthy picture, with little empty space in prime areas.

The report took an inventory of 90 of the largest office buildings and 55 retail buildings on Grand Cayman. The average office is around 5,000 square feet.

The more expensive class A properties, partly fueled by a drop in rent prices, were 94 percent full. Class B properties had vacancies of 15 percent, while the lower end class C properties were 45 percent vacant.

The authors say the figures exemplify a shift of business from downtown George Town to newer offices in Camana Bay, Elgin Avenue and the Seven Mile Beach area.

The report suggests several businesses have “traded up,” while government has consolidated many departments in its new headquarters, leaving vacant space elsewhere.

James Andrews, senior managing director at Integra Realty, said the fact that Cayman had increased its office space and maintained high occupancy rates at the top end, even amid the recession, is a good sign.

However, the report notes that much of the new office space was built with “unconventional” sources of funding, most notably through government coffers and Dart’s financing.

Mr. Andrews noted that the demand for additional new office space, as Dart continues to build, would be a test of just how much Cayman’s white-collar economy continues to grow.

The report adds, “Generally speaking, the office market is dependent upon the financial services sector of the Cayman economy, and its ability to create and sustain jobs. “This sector is under increased scrutiny from other governments and pressure to allow more transparency, as the U.S. and Europe are seeking to recoup lost tax revenues.

“The addition of new space in Cayman coupled with the challenges in the financial services sector is likely to result in higher than typical vacancies and downward pressure on rents; especially for Class B and C buildings.”

The picture in the retail sector is relatively positive, with the vacancy rate around 5 percent.

“This low vacancy rate is symptomatic of the high demand versus low supply of space in the prime retail areas,” the report states.

“This is especially true for large spaces suitable for restaurants and larger retail users. In fact, we noted very few large spaces available in the prime areas apart from the recently vacated Hard Rock Café space and a 6,000 square foot space in The Strand.”

Todd Younghans, a commercial agent with Coldwell Banker who worked on the report, said the only significant new retial development, Caribbean Plaza on West Bay Road, filled up quickly.

“It is tough to point to a whole lot of growth and expansion, but clearly we have rounded a corner and are doing better than we were,” he said.

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