Cayman has a vibrant real estate market providing opportunities for investment by both local and international private individuals, corporations and small investment funds. The market does not have the barriers to international investment that other jurisdictions in the region do resulting in significant sales each year to international investors, through which there a number of paths to achieve Residency.
The total real estate market in the Cayman Islands transacted just under CI$600 million in property sales during 2015 or US$730m having almost doubled from the low experienced during 2010. Of that most were residential or land transactions with probably less than US$150m making up commercial sales, including the sale of commercial land suitable for development.
All transactions attract a 7.5% stamp duty on their market value, which typically equates to their sales price in arms length transactions. There are however no annual property taxes, no income, corporation or capital gains taxes payable.
Commercial Rental Market
The Grand Cayman office space rental market is one of the strongest in the Caribbean region with high demand for all classes of office space traditionally in the region of 75,000 sf to 125,000 sf per annum, primarily from the offshore financial sector. In recent years however the absorption rate has been at the lower end of this range.
The market comprises close to 3.5 million square feet of office space in all classes, which breaks down to roughly 1.25 million square feet of Class A space, 2.00 million square feet of Class B space and the remainder as Class C.
Average vacancy rates vary by class and location from as low as 2-3% for Class A to A+ space, 5-10% for Class B+ to A- and around 15%-20% for Class B and C space. Within these averages, there are a wide variety of vacancies, with some Class B properties in central George Town with vacancies of between 50% to 75%. This has been largely due to the exodus of top quality, larger corporate tenants from the typically older buildings in George Town Centre, where parking ratios are lower, amenities fewer and traffic congestion less to the newer, better amenitised, master-planned community of Camana Bay or edge of town development corridor of Elgin Avenue.
Class A to A+ space is predominantly now found in development-type locations such as Camana Bay and Cricket Square on Elgin Avenue. These consists of hurricane rated buildings, typically at elevations well above the Hurricane Ivan flood plain of 8’, with ample parking and high quality on-site amenities including restaurants, conference facilities and gyms. At the same time, there are a number of Class A to A- standalone office buildings, typically developed between 7 and 15 years ago, which remain attractive however are not as desirable to premium quality, larger tenants as development-based office space.
Rental rates range on a triple net basis from US$42 to US$52 psf pa in the class A to A+ market sector with the highest rents in Camana Bay to US$30 to US$40 per sq.ft. in the Class B+ to A- market sector, falling to US$20 to US$28 psf pa in the Class B market. CAM charges range from between US$15 to US$18 psf pa in developments such as Cricket Square and Camana Bay where infrastructure costs are higher to between US$11 to US$14 psf pa in standalone office buildings in other locations.
Commercial properties can also be acquired fairly easily by non-local private investors or investment groups typically through and SPV such as a local company applying and being granted a trade and business license and Local Companies Control Law License in the absence of a local party wishing to acquire the property. As such, international investment groups own a significant number of commercial properties within the Cayman Islands. Local investors/developers however also play a major role in this market and are responsible for probably 75% of the commercial property transactions here. Most office buildings are developed with a long-hold strategy in mind, however typically a number of buildings are put on the market and sell each year, usually at ROI’s of between 8% to 8.5% for Class A to A+ properties in prime locations with long term leases in place and low vacancy rates and more typically in the 9% to 10.5% range for Class B to A- properties. Most tend to be valued in the US$3 to US$15m range.
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