Caribbean Property & Investment Review — Edition 81: November 2019

Publication Date: 3 November 2019  |  Coverage Period: 3 October – 2 November 2019

Morning Briefing

• Bahamas reconstruction planning has entered a critical organisational phase two months after Hurricane Dorian, with the government establishing the Disaster Reconstruction Authority, international donors formalising commitments, and the first private-sector rebuilding contracts being awarded in Abaco and Grand Bahama.
• The 2019 Atlantic hurricane season has been notably active, with Dorian’s devastation the defining event, but the broader Caribbean region outside the Bahamas has largely avoided catastrophic landfalls — a pattern that has allowed tourism and investment activity to proceed relatively normally across most islands.
• Guyana’s oil pre-production momentum continues, with ExxonMobil’s Liza Phase 1 project progressing through final commissioning and the energy investment community increasingly focused on Georgetown’s commercial and residential property market as the production start looms.
• Caribbean property insurance markets are under unprecedented scrutiny following Dorian, with underwriters reassessing hurricane zone pricing models and several major reinsurance groups signalling adjustments to Caribbean property risk assessments that will affect premium pricing for 2020.
• Jamaica’s tourism sector reports October arrivals tracking strongly, with the island on course to deliver its best annual performance on record and the north coast hotel investment pipeline advancing with multiple projects in active development.
• The US Federal Reserve cut interest rates for the third time this year at its October meeting, bringing the federal funds rate to 1.75% and maintaining the supportive financing environment that has underpinned Caribbean mortgage and investment markets throughout 2019.

Bahamas Reconstruction: Two Months On and the Road Ahead

The scale of destruction wrought by Hurricane Dorian in the Bahamas two months ago remains difficult to fully absorb even for those who have studied Caribbean storm damage extensively. With sustained winds of 185 miles per hour at landfall — matching the Atlantic basin record — Dorian parked over Grand Bahama and the Abaco Islands for more than 24 hours, generating a storm surge that in some areas reached 23 feet and systematically dismantling the built environment in ways that Category 5 storms rarely achieve because they typically keep moving. The preliminary damage assessment of USD 3.4 billion represents approximately 25 percent of the Bahamas’ entire GDP — a ratio that places Dorian among the most economically devastating storms to strike any Caribbean nation in modern history.

The Minnis government’s formal reconstruction response has centred on the establishment of a Disaster Reconstruction Authority (DRA) designed to coordinate the planning, permitting, and contracting processes that necessarily underpin large-scale rebuilding. The institutional design of the DRA — including its governance structure, procurement processes, and relationship to existing government agencies — has been developed with input from international experts who have studied post-disaster reconstruction experiences in other Caribbean jurisdictions, notably Dominica following Hurricane Maria and St Martin following Irma.

For the property market specifically, the reconstruction programme raises questions that go beyond simple repair and replacement. The Abaco Islands — particularly Marsh Harbour, Treasure Cay, and the surrounding settlements — had developed a distinct property market serving both a permanent resident population and a substantial recreational boating and vacation community, many of them North American. The vacation and second-home segment of the Abaco market was characterised by a mix of modest Bahamian-owned homes, modest vacation cottages, and a range of marina-adjacent properties serving the cruising and boating community. Much of this inventory was effectively destroyed.

The insurance settlement process for private property is proceeding, but with the complexity and contestation that typically accompanies large-scale post-disaster claims. Bahamian property insurance penetration was uneven: many local homeowners, particularly in lower-income communities like The Mudd and Pigeon Peas in Marsh Harbour, had little or no formal insurance coverage, leaving them dependent on government assistance and charitable support. International second-home owners were typically better insured, though the comprehensiveness of their coverage is proving variable. Industry sources estimate that total insured losses will fall significantly below total damage, creating a substantial financing gap for reconstruction.

The longer-term question for Abaco and Grand Bahama’s property markets is about the character of what gets rebuilt. Several schools of thought are emerging in conversations among Bahamian property professionals and government officials. One view holds that reconstruction should prioritise affordable and resilient housing for displaced residents, with commercial tourism and recreational property development following once the community foundations are secure. Another perspective emphasises the importance of re-establishing Abaco’s tourism product as quickly as possible — recognising that the island’s economy is fundamentally tourism-dependent and that delay in the recreation of that product has cascading economic consequences for the permanent population.

Caribbean Hurricane Risk: What the 2019 Season Teaches

The 2019 Atlantic hurricane season has been a powerful reminder that Caribbean property investment must be evaluated through the lens of physical risk, not merely market fundamentals. While most of the Caribbean — outside the Bahamas — escaped the season without catastrophic landfalls, Dorian’s impact has forced a regional conversation about risk assessment, building standards, insurance adequacy, and the relationship between climate trends and Caribbean property values that the industry has sometimes been reluctant to engage directly.

Property insurance underwriters in the Lloyd’s of London market and among major international reinsurers are now conducting detailed reviews of their Caribbean exposure following Dorian. The storm’s unprecedented stall over the Bahamas — moving at just one to two miles per hour for an extended period — generated damage patterns that challenged existing actuarial models, particularly for storm surge and flood coverage. Several reinsurers are understood to be revising their Caribbean property risk pricing upward for 2020 renewals, with the most significant increases likely in the northern Bahamas, southern Florida, and the broader hurricane threat zone.

For Caribbean property professionals, the insurance implications have direct consequences for investment calculations. Rising premiums in high-risk zones affect the net operating income of resort and residential properties, changing the mathematics of investment return. Buyers and investors need to factor realistic, forward-looking insurance costs into their underwriting — not just the current premium but the trajectory of future pricing in a market where reinsurers are increasingly pricing climate risk explicitly. This is a conversation that Caribbean real estate professionals are not always comfortable initiating with clients, but it is one that honest practice increasingly demands.

The building code dimension of hurricane resilience deserves equal attention. Caribbean building codes vary enormously in their stringency, their enforcement, and their consistency of application between formal and informal construction. The contrast between Dorian’s impact on formally constructed resort and marina properties in Abaco — which sustained serious but often repairable damage — and the informal housing settlements that were essentially obliterated illustrates starkly what construction standards mean in the context of a Category 5 storm. Post-disaster reconstruction programmes represent an opportunity to embed higher standards, but only if the political will to enforce them is sustained beyond the immediate emergency phase.

Caribbean Markets Beyond the Bahamas: Resilience in Action

While the Bahamas quite rightly dominates property risk conversations this month, it is important to record that the broader Caribbean region has navigated the 2019 hurricane season with its property and tourism markets largely intact. This resilience — which is genuine, not merely rhetorical — reflects the geographic diversity of the Caribbean’s risk exposure and the significant improvements in building quality and emergency preparedness that have been implemented across the region since 2017’s devastating season.

Jamaica’s October tourism performance was strong, with the island tracking toward its best annual arrivals figure in history. The north coast hotel and villa market is performing well, with resort capacity constraints in Montego Bay during peak periods driving interest in new hotel development. Several significant hotel projects are in active construction or advanced planning stages along the north coast, including expansions of the Sandals and RIU resort portfolios and new boutique hotel developments targeting the growing experiential tourism segment.

Barbados is making steady progress on its BERT economic recovery programme, with October data suggesting the fiscal adjustment is proceeding broadly as planned under the IMF arrangement. The Platinum Coast real estate market remains cautious by historical standards, reflecting the lingering uncertainty around the debt restructuring process, but agent reports suggest that international buyer inquiry is recovering and that several significant transactions are in advanced stages of negotiation in the St James corridor.

Trinidad and Tobago’s commercial property market in Port of Spain is navigating a period of selective activity, with the energy sector providing a floor to commercial demand even as the economy adjusts to lower natural gas production from some established fields. The government’s ongoing discussions with Atlantic LNG partners about train optimisation and potential new production from offshore blocks provide a degree of medium-term confidence that is supporting commercial property sentiment in the capital.

Guyana Pre-Production: Investment Implications Now

ExxonMobil’s Liza Phase 1 project continues to advance through final commissioning stages, with first oil now expected before the end of 2019. The final months before first production have been characterised by intense commercial activity in Georgetown: lease signings for office space, new hotel room blocks being contracted by energy companies for staff accommodation, and a growing market in logistics and warehouse property adjacent to the city’s port facilities.

Caribbean investors who moved early into Georgetown commercial property have already seen significant appreciation. Those watching from the sidelines are now asking whether the investment case remains compelling as prices have moved. The honest answer is that the demand drivers — an oil industry with a production horizon measured in decades, a capital city with inadequate commercial and residential property stock, and a government committed to using oil revenues for infrastructure development — are structural in nature and unlikely to be exhausted quickly. Georgetown’s property market is in early innings, not late ones.

Caribbean Leaders This Month

Bahamas (Reconstruction): The DRA’s establishment and the first private rebuilding contracts represent genuine organisational progress. The scale of the task remains immense, but the institutional framework for managed reconstruction is taking shape.

Guyana (Georgetown Commercial): Final pre-production months are driving intense commercial real estate activity. Office and logistics property in Georgetown continues to appreciate strongly as the operational oil era approaches.

Jamaica (Tourism Record): October arrivals confirm Jamaica is on track for its best-ever tourism year. The north coast hotel development pipeline reflects the industry’s confidence in sustained growth.

Dominican Republic (Resort Recovery): October occupancy data continues to confirm the tourism recovery following the mid-year hotel safety concerns, with the resort sector performing strongly as the peak winter season approaches.

St Lucia (Luxury Inquiry): The Cap Estate and Rodney Bay corridors are attracting elevated inquiry from international buyers, with the island’s strong 2019 tourism performance and improving airlift supporting the investment case.

Cayman Islands (Financial Services Property): Grand Cayman’s commercial property market continues to benefit from the island’s status as a leading offshore financial centre, with office demand from funds management, legal, and accounting firms remaining robust.

Grenada (CBI): The CBI programme continues to generate solid application volumes, supporting the pipeline of approved real estate projects and the island’s emerging high-end tourism sector.

Overall Regional Performer — November 2019: Jamaica. Consistent tourism outperformance, a functioning housing programme, and a commercial property market attracting international investment make Jamaica the region’s most comprehensively positive story as the year moves toward its close.

Looking Ahead

The Caribbean’s attention over the next sixty days will be divided between the approach of the holiday season — always the peak moment for the region’s resort and villa property market — and the anticipated arrival of Guyana’s historic first oil milestone. Both events carry significant implications for the region’s property and investment professionals, and both are expected to generate considerable market activity in December and January.

For Bahamas reconstruction, the coming months will be critical in establishing whether the organisational and financial framework being assembled can translate into actual construction activity at meaningful scale. The approaching 2020 hurricane season — still more than six months away, but a real consideration in rebuilding planning — creates urgency for the most vulnerable communities in Abaco and Grand Bahama. Progress in the next six months will do much to determine whether reconstruction maintains momentum or bogs down in the institutional difficulties that have plagued previous Caribbean post-disaster efforts.

The property insurance market’s 2020 pricing cycle will provide an important real-world test of how underwriters have absorbed the Dorian data into their Caribbean risk models. Significant premium increases in high-risk locations — which several market participants are anticipating — will have direct implications for investment return calculations in affected markets and may prompt some investors to revisit their portfolio allocation to the most exposed Caribbean property segments. This is not cause for panic but for informed reassessment — exactly the kind of rigorous risk analysis that professional property investment demands.

The Caribbean Property & Investment Review is published monthly. Edition 81 covers the period 3 October – 2 November 2019. All market data represents conditions during the coverage period. This publication does not constitute investment advice.