Report forecasts construction recovery for the Caribbean

The Caribbean continues the road to recovery from the effects of the global recession, but the pace of recovery varies considerably between the islands, the Fourth Quarter Construction Market Intelligence report by global property and construction firm Rider Levett Bucknall noted. 

While countries like the Dominican Republic continue to see strong growth and the reconstruction of Haiti has led to an expanding construction sector there, other Caribbean countries are held back by a modest growth in the tourism sector and declining remittances. Quoting World Bank forecasts the report noted an increased GDP growth in the Caribbean of 3.8 percent in 2010, up from 0.5 per cent in 2009, as well a GDP of 4.1 per cent forecasted for 2011. However, this may prove optimistic, the report said, as the Economic Commission for Latin America and the Caribbean predicts only 1.9 per cent growth in the Caribbean for 2011. 

In particular the economic slowdown in industrialised countries could affect the volume of Caribbean exports and makes it difficult to predict the economic development in the region. At the same time plans to set up a single economic area in the Caribbean will take longer than the initially targeted 2015. 

The report stated economic growth in the region is strongly related to an increase in Caribbean tourism figures. After a fall in 2009, total stay-over arrivals increased by 4 per cent and cruise tourism grew by 6 per cent in 2010. Occupancy rates have been up 3.1 per cent, revenue per available room was up 4.3 per cent and total room revenue was 7.1 per cent higher, but due to discounting performance has not reached pre-2008 levels yet. 

The bulk of the visitors to the Caribbean is coming from the United States, which also accounts for much of the growth, up by 5.7 per cent, Rider Levett Bucknall said. Tourism will be buoyed by a further 5 per cent rise in 2011, driven by growth in the Dominican Republic, Jamaica, Puerto Rico, St Lucia, the Bahamas, Cuba, Anguilla and the Cayman Islands. 

Funding is a major factor affecting hotel development in the region and much of the hotel growth is taking place in the luxury segment, the report said. About 8,000 rooms, roughly 3 per cent of the total hotel rooms stock of 250,000 in the region, are currently in development. This mainly includes major projects in the Dominican Republican and the Bahamas. Haiti, Anguilla, St Kitts & Nevis, Turks & Caicos and St. Lucia are other islands with growth of more than 5 per cent.  

The construction and property firm said although many islands have ambitious development plans, “the level of construction activity is often far less than anticipated” and a number of government backed projects remain on hold. It sees the most promising prospects for the construction industry in Antigua and Barbuda, the Bahamas, Barbados, the Cayman Islands, Cuba, the Dominican Republic, St Lucia and the US Virgin Islands.  

Cayman Islands  

For the Cayman Islands the report noted an end of the recession and expected economic growth this year, but also a falling population. After a slow couple of years, Cayman’s construction industry is expecting a turnaround due to major planned developments including the George Town Cruise Port Development project, the Cayman high schools project, the proposed Narayana Cayman University Medical Centre in East End, Dragon Bay and Cayman Enterprise City. However, the East End sea port project, mentioned in the report, is already off the table.  

The firm’s estimates of construction costs showed Cayman has the highest industrial construction costs in the Caribbean and trails only Cuba and Bermuda in the construction cost of office space. However, estimated hotel construction costs in Cayman of between $320 and $350 per square foot are significantly lower than in most locations in the Caribbean, including the Bahamas ($450 to $650) and the US Virgin Islands ($405 to $594), data released in the report showed. The cost of residential construction of $250 to $330 per square foot in Cayman is lower at than for example in Barbados ($280 to $400) and Bermuda ($280 to $432), comparable to the Bahamas ($130 to $420), but higher than in most other locations.