Construction costs rising

A variety of external and internal factors are causing construction prices to rise in the Cayman Islands, report two of the industry’s leading associations.

Cayman Contractor’s Association President Steve Hawley, who spoke on behalf of the CCA, said some of the factors could cause long-term construction cost increases. One such factor is the global demand for construction commodities.

‘Our US-based inflation means that we now pay much more for commodities than other nations.’

Mr. Hawley said that although there might be a decline in the United States’ construction industry, countries like China, India, Canada and Qatar are booming at incredible rates.

‘[Those booming countries] put huge demands on the limited resources we need for our equipment and materials,’ he said. ‘Therefore, these commodity prices continue to climb.’

Mr. Hawley said Cayman faced a ‘double whammy’.

‘The severely weakening US and CI dollar means that we are paying much more for these commodities than other nations,’ he said. ‘This further increases our cost of construction, not to mention our cost of living on all fronts.’

Cayman Society of Architects, Surveyors & Engineers President Sam Small reported another reason for the upswing in construction costs.

‘The raising construction costs in Cayman are mainly due to the increase in material costs due to the rise in oil prices,’ he said. ‘It affects us because everything is imported by ship or air.’

But Mr. Small noted that some of the increases in construction were customer initiated.

‘Customers today want high-end finishes and larger buildings, which in turn cost more to build,’ he said. ‘Commercial buildings are more complex with deluxe electrical systems and [hurricane] rated materials as standard today. This adds up to more cost.’

Although Cayman cannot do anything about external factors like the value of the US dollar or the global demand for construction commodities, there are other internal factors that also raise construction costs.

Mr. Hawley pointed to Cayman’s immigration and education policies and the global demand for skilled workers.

‘The US baby-boomer generation will hit legal retirement age in two years,’ he said. ‘From 2009 to 2025, the worldwide workforce will shrink each year, as more boomers retire.’

To address shrinking workforces, Canada and countries in Western Europe have improved their immigration policies to attract and retain skilled workers from other lands, Mr. Hawley said.

‘These forward-looking countries do not send their skilled workers away after seven years.’

Mr. Hawley noted that other countries also create new skilled construction industry workers through apprenticeship programmes for their citizens.

‘In Cayman we lack the policies to attract and retain skilled trades-people,’ he said. ‘We lack the policies to establish viable apprenticeships for our young people. And… we now lack the strong dollar to buy our way out of the problem. Foreign workers will be attracted to go elsewhere.’

As a result, Cayman construction employers must ‘do more each year than we did in the past to attract foreign workers’, Mr. Hawley said.

Mr. Small agreed that foreign workers were now more difficult to attract and retain.

‘Expat workers are drawn overseas by the chance to earn more money abroad than in their home country, and with the weak US dollar, the potential is less now,’ he said. ‘So we have to pay more for the skilled labour we require.’

Although he also noted that Cayman has not done enough to train its own young people in the trades and was therefore dependant on foreign labour, Mr. Small said the new courses being offered at the University College of the Cayman Islands could help over the long term.

Mr. Small warned the proposed National Conservation Bill could also affect construction costs.

‘CASE’s concerns are that the new proposed environmental law has the potential to add dramatic costs to construction on this island if it was enforced as it is currently written,’ he said. ‘We understand and agree with safeguarding the environment, but this proposed law goes far beyond what is required, and what we understand is intended by the Department of Environment.’

Mr. Small said the proposed law is so vague ‘development could stop overnight’ if it were enforced as written.

Among the contentious aspects of the law for CASE are: the possibly excessive requirement of needing environmental impact studies for building; the possibilities of fines for unforeseen environmental impacts; and the undefined areas to be governed by the law.

‘Just think of the real estate industry if they have to put a disclaimer on every sale that the buyer has to do an environmental impact study before building,’ Mr. Small said.

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