Caribbean Property & Investment Review — Edition 83: September 2019

Publication Date: 3 September 2019  |  Coverage Period: 3 August – 2 September 2019

Morning Briefing

• BREAKING — Final days of our coverage period: Hurricane Dorian made landfall on the Abaco Islands, Bahamas, on September 1 as a catastrophic Category 5 hurricane with sustained winds of 185 mph — the strongest Atlantic landfall on record. As this edition goes to press, the storm is still over the Bahamas having stalled virtually stationary over Grand Bahama, causing damage of a scale not yet fully assessed but already clearly catastrophic.
• Caribbean summer tourism 2019 delivered its strongest August performance in years across Jamaica, Barbados, Dominican Republic, and the Eastern Caribbean, with the region tracking confidently toward what the Caribbean Tourism Organisation projects will be its best annual arrivals total in history.
• Jamaica posts another record month in August, with Montego Bay and Sangster International Airport handling its highest-ever passenger volumes and the north coast resort communities reporting exceptional occupancy across both all-inclusive and villa accommodation segments.
• Dominican Republic’s tourism sector reports August occupancy running strongly across Punta Cana and other resort zones, with the summer recovery from the hotel safety crisis of May-June now firmly established and major operators expressing confidence going into the peak winter season.
• Guyana Liza Phase 1 project passes further commissioning milestones through August, with ExxonMobil and partners maintaining their projected first oil timeline as the Destiny FPSO completes pre-production testing offshore the Stabroek Block.
• Caribbean short-term rental platforms report the summer season has been their strongest on record across the region, with Caribbean listings on Airbnb and competing platforms achieving occupancy rates and nightly rates that comfortably exceed both 2018 comparatives and pre-season projections.

BREAKING NEWS: Hurricane Dorian Devastates the Bahamas

As this edition of the Caribbean Property & Investment Review goes to press, Hurricane Dorian — having made landfall on the Abaco Islands of the Bahamas on September 1 with sustained winds of 185 miles per hour — is still grinding over Grand Bahama Island in what meteorologists are calling one of the most remarkable and devastating hurricane events in Atlantic basin history. The storm, which achieved maximum intensity before landfall that tied the all-time Atlantic record for sustained winds at the point of landfall, has essentially stalled over the northern Bahamas, subjecting Grand Bahama and the Abaco Islands to hour after hour of Category 5 conditions — a scenario that is unprecedented in its duration and accordingly catastrophic in its consequences.

Preliminary reports from the Abaco Islands are deeply alarming. The communities of Marsh Harbour, Treasure Cay, and the outlying cays and settlements that make up the Abaco chain are understood to have experienced storm surge of up to 20 feet in some areas, accompanying winds that have stripped structures to their foundations. Communications from the islands have been intermittent and often absent, complicating the initial assessment of human casualties and property damage. The Bahamian government’s NEMA has been coordinating rescue and relief pre-positioning, but the physical conditions during the storm have made access impossible.

In Grand Bahama, the sustained assault on Freeport — the island’s main settlement and the Bahamas’ second city — is continuing even as we write. The storm surge threat to low-lying areas of Freeport has been described as extreme by the National Hurricane Center, and early reports suggest widespread flooding of both residential and commercial areas of the city. The Grand Bahama International Airport has been closed. The scale of damage to Freeport’s industrial, port, and commercial infrastructure is not yet assessable.

Nassau and Paradise Island, which together host the great majority of the Bahamas’ tourism infrastructure including the Atlantis resort complex, have not been in Dorian’s direct path and are understood to be experiencing tropical storm conditions rather than the catastrophic Category 5 impacts affecting the northern islands. Tourism officials have emphasised that Nassau remains accessible and operational, and that the Bahamas as a tourism destination extends far beyond the affected areas. This is an important and accurate distinction, but it will take careful and sustained communication to prevent Dorian from damaging the reputation of the entire Bahamas brand in key source markets.

For the Caribbean property market, the immediate implications of Dorian are profound. The Abaco Islands had developed a distinctive second-home and recreational property market serving North American buyers attracted by the islands’ sailing and boating culture, pristine waters, and relative proximity to Florida. Grand Bahama had its own property market serving both permanent residents and a smaller second-home segment. Much of this market appears to have been catastrophically damaged. The insurance implications — which we will examine in detail in our October edition once initial loss assessments are available — are certain to be severe and will affect property coverage pricing across the entire Caribbean region.

Caribbean Summer 2019: A Season of Records Before the Storm

The summer tourism season across the Caribbean — the period from late June through August — delivered performance that would have been the dominant story of this edition had Hurricane Dorian not intervened so dramatically. Across the region’s major destinations, the combination of continued airlift expansion, strong consumer demand from North American and European source markets, and the sustained momentum of the Caribbean’s global brand has produced a summer season that is tracking materially ahead of already-strong 2018 comparatives.

Jamaica’s summer performance has been exceptional. August visitor arrivals at Sangster International Airport in Montego Bay reached new highs, with the airport handling record passenger volumes that reflect both the expansion of scheduled airline capacity on North American routes and the continued growth of the charter market from the UK and Europe. The all-inclusive resort sector — Sandals, RIU, Iberostar, Couples, and others — reported strong August occupancy that extended well into the traditionally softer mid-month period. Villa and boutique property in the Montego Bay and Negril areas also performed strongly, with the growing boutique tourism segment attracting visitors who seek more personalised Caribbean experiences alongside the traditional all-inclusive offering.

For property investors with Jamaica exposure, the summer’s performance reinforces the investment thesis that has driven the north coast hotel development pipeline: the island’s tourism demand is structural, not cyclical, and is sufficiently diversified across source markets and visitor types to sustain strong performance through the full year including the traditional shoulder seasons. The continuing expansion of Sandals’ Jamaica portfolio — the operator has been the most consistently bullish large-scale investor in Jamaican resort property over the past decade — reflects institutional confidence in the island’s long-term trajectory.

The Dominican Republic’s summer performance warrants particular attention given the context of the hotel safety concerns that dominated the island’s tourism narrative in May and June. The death of American tourists at Dominican Republic hotels in those months, and the subsequent US State Department travel advisories and extensive media coverage, created a period of genuine uncertainty about the island’s tourism outlook. The summer data now available makes clear that the recovery has been faster and more complete than many initially feared. August occupancy in the Punta Cana resort zone tracked strongly, with anecdotal reports from resort operators suggesting that booking cancellations peaked in June and have since been largely replaced by new reservations from travellers who assessed the situation rationally rather than reacting to the initial media alarm.

Caribbean Short-Term Rental Markets: Summer Record Performance

The short-term rental sector’s summer 2019 performance across the Caribbean has provided strong validation for the investment thesis that has drawn property buyers into the villa and condominium market across the region. Airbnb, VRBO, and competing platforms all report Caribbean listings achieving their strongest summer occupancy on record, with the Caribbean consistently ranking among the platform’s top-performing global regions during the June-August period.

The data from specific markets is compelling. Jamaica’s Airbnb listings, now numbering in the tens of thousands across the island, achieved average occupancy rates through the summer that compare favourably with established high-performing markets globally. Average daily rates in premium locations — Montego Bay, Negril, Port Antonio — tracked above the same period in 2018, while occupancy rates held steady or improved. The combination of rising rates and sustained occupancy represents exactly the yield dynamics that attract property investors to the short-term rental model.

Barbados’s short-term rental market benefited from the island’s sustained appeal to the British visitor market in particular, with August delivering strong performance for villa owners along the Platinum Coast and the south coast. The BERT economic recovery context has not dampened international visitor appetite for Barbados — on the contrary, the island’s distinctive character and the premium it commands in the British market continue to support yields that justify villa ownership economics.

Guyana Oil: Commissioning Milestones Through the Summer

While Dorian dominates the Caribbean news agenda, it is important to note that ExxonMobil’s Liza Phase 1 project has continued to advance through its commissioning programme through the August period. The Destiny FPSO, which will be the production hub of the Liza operation, has been completing systems testing and pre-production preparations offshore Guyana, and the project remains on track for a first oil announcement before the end of 2019.

Georgetown’s commercial property market has maintained the elevated activity levels that have characterised it since the scale of the Stabroek Block resources became clear. Office leasing activity has remained strong through the summer, with the energy services ecosystem around the project continuing to expand as first oil approaches. The corporate accommodation market — serviced apartments and premium residential rentals for expatriate professionals — remains tight, with new product being absorbed quickly as it becomes available.

Caribbean Leaders This Month

Bahamas (Emergency Response): The government, NEMA, and the Bahamian people are responding to an unprecedented catastrophe. The property market implications of Dorian’s destruction will be profound and will be examined in detail in our October edition.

Jamaica (Summer Tourism Champion): Record August arrivals, exceptional resort and villa occupancy, and an investment pipeline that reflects industry confidence in sustained growth make Jamaica the summer’s outstanding regional performer by a clear margin.

Dominican Republic (Recovery Confirmed): August occupancy data confirms that the tourism recovery from the May-June hotel safety crisis is real and substantive. The island’s major operators are committed to their 2020 investment programmes.

Guyana (Pre-Production): The Liza Phase 1 commissioning programme is advancing on schedule, maintaining the investment community’s attention on Georgetown’s transforming commercial property market.

Barbados (Rental Resilience): Strong Platinum Coast villa rental performance through August demonstrates that investor-grade properties in well-established Caribbean markets maintain their yield characteristics even through periods of macroeconomic adjustment.

Turks and Caicos (Luxury Pipeline): The development pipeline in Providenciales continues to advance, with several significant luxury villa and boutique hotel projects in construction or planning, supported by sustained demand from the ultra-high-net-worth buyer segment.

St Lucia (Airlift Growth): New direct routes from key North American cities are broadening the island’s source market base and driving above-average growth in both visitor arrivals and villa rental demand.

Overall Regional Performer — September 2019: Jamaica. A summer of record-breaking tourism performance, combined with a functioning affordable housing programme and a growing commercial investment pipeline, makes Jamaica the most comprehensively positive Caribbean property market through the summer of 2019.

Looking Ahead

The immediate focus for the Caribbean property community must be on Hurricane Dorian and its aftermath. The scale of destruction in the northern Bahamas — which will only become fully apparent in the days and weeks following this edition’s publication — will require a humanitarian and reconstruction response of historic proportions. Our October edition will provide a detailed assessment of the property market implications: the damage extent, the insurance landscape, the reconstruction programme design, and the long-term market outlook for Grand Bahama and Abaco.

For the broader Caribbean, the shift from summer season to the traditional autumn shoulder period brings the customary moderation in tourism volumes, though the region’s growing year-round appeal is reducing the seasonal variation relative to historical norms. The approach of the peak winter season from November onward is the next major commercial catalyst, and advance booking data from the region’s major destinations will provide an important early read on the season’s likely performance in our October and November editions.

Guyana’s first oil milestone remains the Caribbean’s most anticipated economic event, with the production timeline pointing toward an announcement before year-end. The property and investment implications of that milestone for Georgetown and the broader regional economy are already being reflected in commercial real estate markets, but the confirmation of first production will trigger a new phase of investment activity that will be felt across the Caribbean for years to come.

The Caribbean Property & Investment Review is published monthly. Edition 83 covers the period 3 August – 2 September 2019. All market data represents conditions during the coverage period. This publication does not constitute investment advice.