Construction industry reeling

Contractors in the Cayman Islands
are struggling through what many are calling the worst downturn in business
since the building boom began here in the 1970s.

With construction business down
significantly many contractors are laying off significant portions of their
staff and taking projects they wouldn’t normally take.

Howard Finlason of Royal
Construction said some construction companies are going out of business and
others are fighting for survival.

“This is the toughest any of us has
seen it by far,” he said. “Commercial projects, the kind for speculation as
well as non-government contracts, are drying up.”

Hadsphaltic Ltd., a major
contractor in the Cayman Islands for more than 40 years, recently abandoned its
only major project and closed its office here. 
Although the Hadsphaltic Group CEO said the closure was only temporary,
the company faces an uncertain future.

Hurlstone Ltd. Managing Director
John Hurlstone said this week his workforce was down by 60 per cent after
recent lay-offs, and although some of the men have had to leave the Island,
many of them were Caymanian status holders.

Edgewater Development President
Kris Bergstrom said the economic crunch has far-reaching effects on the
construction industry.

“In addition to laying off staff,
some companies were also reducing office and storage space, as well as changing
policy in certain areas or simply leaving the Island,” he said.

To get through the hard times, Mr.
Bergstrom said the Contractors Association had developed some tools for members
to share resources, including labour.

Alan Roffey, chief executive of
AndroGroup, a major mechanical, electrical and plumbing contractor, said his
company laid off 30 people last Friday.

“That represents 40 to 50 per cent
of our hands-on tradesmen,” he said. “That is a deep cut in our core group of
employees.  We’re now down under 100 employees
for the first time in six or seven years.”

AndroGroup had already laid off
about half of its staff when work on its major projects, the two new government
high schools, came to a halt last November. At least one of the schools
projects is expected to get going again soon, but Mr. Roffey said he doesn’t
see a lot of other work on the horizon right now.

“Maybe the Dr. Shetty hospital, but
who knows?”

High-end homes

One construction industry segment
that has remained fairly busy is new high-end homes.

Both Mr. Bergstrom and Mr. Finlason
said people are building houses or personal homes, partially because interest
rates are low.

“Traditionally some of the larger
companies have stayed away from [building] private homes and even that is
changing some now,” Mr. Finlason said. “You will always have the home market.
The only thing is that this area is also waning.”

Although Mr. Bergstrom said luxury
accommodations are not accounting for most of the business at Edgewater, the
market is fairly strong and, “some investors prefer to put their money into a
market that is still yielding good long-term returns and this accomplishes that
for them.”

Mr. Hurlstone agreed that some of
the housing segment of the industry is thriving.

“Medium to upper home construction
is keeping the industry going right now,” he said, adding that Cayman is still
an attractive place to build homes for investors and that these decisions are
not necessarily based on speculation.

Managing partner of Exeter Property
Development, Neil Rooney, said residential and commercial developers, with
financing in place, are continuing to bet on the long-term future of the Cayman
Islands and Caymanians are still building homes.

“This, together with the recent
recipients of naturalisation grants, means there is still an appreciable market
for premium, luxury homes. We are also banking that the US/UK baby boomer
retirement wave will soon arrive and as a result keep that sector thriving,” he
said.

The long-term view

Mr. Hurlstone said there are some
exciting projects planned for the near future that he was not at liberty to
discuss and insisted that if those received the green light, things would
change significantly across the board for builders. 

“The new planning bill, which the
government is trying to be proactive with, should be a significant factor in
how business is done in the future because it would separate real investors
from those who are predatory, making for a more stable market,” he said.

Mr. Hurlstone estimated that in
roughly six months to a year, the economy in the Cayman Islands will start to
rebound “if all promising contributing factors merge and come into play”.

Mr. Finlason also expressed some
optimism about the future as well, saying he hopes things will improve with the
new [government] budget and that some of the proposed government projects being
discussed would generate movement in the market.

The sentiment was echoed by Mr.
Bergstrom.

“There are several good, strong
indicators on the horizon for the industry, and we are using this as an
opportunity to make the necessary adjustments to our business to be prepared.”

Shane Howe of Phoenix Construction
saw opportunity arising from the current situation.

“When the market contracts
businesses become conservative and financing dries up,” he said. “However,
astute business people, having weathered these cycles in the past, are now
taking advantage of the combination of lower worldwide commodities pricing and
more competitive fees. They are building for the future and will be the
best-positioned businesses when the economy rebounds.”

Mr. Roffey agreed.

“I see some opportunity for
consolidation if people have some cash and are willing to invest it,” he said,
adding there are also opportunities for contractors to work together.

Alan Markoff also contributed to this article

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4 COMMENTS

  1. One has to wonder what the effect of soaring prices on investments in property, for rental return, has done. With an oversupply of properties on the market, rental prices have come down. Add in the increase in strata fees, insurance and other costs and the ROI drops to around 5% – that is why investors no longer value real estate as a healthy investment option.

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  2. So finally we are seeing everyone hurting now. I hope people see and realise exactly what is happening in the country. We all need each other. Expats and locals alike. This country needs to accept everyone. From the little man that bushes out the yard to the man in the high rise office who drives the top of the line vehicle. We all need each other if this country is to survive.

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  3. The construction industry has, like economies, always been cyclical. The companies which understand this, and put aside money when the sun shines, will cope with the rainy days, and be ready to resume when the sun comes out again.
    A significant difference for Cayman is that the industry depends too largely on imported (expensive) labour, partly because too many Caymanians don’t like hard work, or feel they deserve special consideration. And to mobilise such labour quickly is complicated by the employment regulations.
    The political/economic/financial situation must give overseas investors pause for thought. Sadly, therefore, not a place for such investors to consider favourably for the time being.

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  4. There were two options – taxation and increased fines, fees, and duties. We chose the latter with its many complexities and headaches. We chose increase in everything, our way of life, even on groceries and food items.

    From long time, we should have at least adopted a taxing system like the payroll where we could have at least easier manage and know where the funds are going. We could have had a system where we could have used the funds to help those unemployed and have a good healthcare system implemented.

    But no! We chose the way of hiking up price and cost on everything even on fuel. Now we at the low end has become suppliers of a monopology, and don’t know who is benefiting from our expenses. Real smart

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