Caribbean Property & Investment Review — December 2019

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

Morning Briefing

• ExxonMobil’s Liza Phase 1 project is on the cusp of achieving first oil in Guyana — industry sources indicate the Destiny FPSO is in final commissioning stages and the historic milestone of first Caribbean oil production from the Stabroek Block could be announced at any time, a moment the entire region has been anticipating for years.
• Caribbean tourism is closing 2019 on a record pace, with the Caribbean Tourism Organisation tracking year-to-date stayover arrivals substantially ahead of 2018 figures — confirming what many in the industry have been saying since August: this will be the best year in the region’s tourism history.
• Holiday season villa and resort bookings across the Caribbean are at their strongest in years, with premium properties in Jamaica, Barbados, St Lucia, and Turks and Caicos reporting December fully committed and inquiry for January and February running well ahead of the same period last year.
• Jamaica’s National Housing Trust announces its full-year lending targets have been met, with the housing programme delivering another strong year of first-home provision and the government signalling an expanded affordable housing pipeline for 2020.
• Bahamas reconstruction efforts in Grand Bahama and Abaco continue to advance three months after Hurricane Dorian’s catastrophic impact, with international donor pledges flowing and government contracting gathering pace, though the scale of the task remains immense.
• Dominican Republic hotel and resort sector reports November occupancy running at strong levels, with major operators expressing confidence that 2019 will close on a substantially positive note despite the turbulence of the summer months.

The Moment of Guyana First Oil: Why the Caribbean Is Holding Its Breath

There are moments in a region’s economic history that carry consequences stretching far beyond the immediate headline, and the imminent achievement of first oil production from ExxonMobil’s Liza Phase 1 project in Guyana is unquestionably one of them. As this edition goes to press, the Destiny FPSO — the floating production, storage and offloading vessel that will be the production hub of the Liza operation — is understood to be in advanced commissioning stages, with first oil expected within days or weeks at most. The Caribbean investment community is watching with a combination of excitement and quiet awe.

To understand why this moment matters so profoundly, it is necessary to recall the scale of what has been discovered. The Stabroek Block, operated by ExxonMobil with partners Hess Corporation and CNOOC, contains an estimated resource base that now exceeds eight billion barrels of oil equivalent — a figure that ranks among the most significant deepwater oil discoveries of the past two decades globally. For a country of fewer than 800,000 people with a GDP that has historically placed it among the region’s smaller economies, the implications are staggering.

Georgetown’s commercial real estate market has already transformed in anticipation. Office rents in the capital’s business district have escalated sharply over the past eighteen months as international energy companies, professional services firms, logistics operators, and financial institutions have raced to establish their Guyana presence ahead of first production. The corporate accommodation market — serviced apartments and executive rental homes for the growing expatriate professional community — is severely supply-constrained, with waiting lists for quality product becoming commonplace. Developers who moved early to respond to this demand are now reaping significant rewards.

The residential property market in Georgetown’s better neighbourhoods — Bel Air, Prashad Nagar, Lamaha Gardens — has also responded to the transforming economic environment. Land prices have appreciated materially, and new residential development is advancing wherever permitting and financing can be secured. The government of President David Granger has been managing the transition carefully, establishing a sovereign wealth fund framework — the Natural Resource Fund — to govern the deployment of oil revenues, and engaging international advisory expertise to help navigate the governance challenges that accompany a resource windfall of this magnitude.

For Caribbean property professionals operating beyond Guyana, the first oil moment carries two primary implications. First, it validates the investment thesis that has been attracting capital to Georgetown for the past three years, and is likely to accelerate rather than satiate that interest as the reality of production begins to generate tangible revenues. Second, the ripple effects through the regional economy — in Trinidad’s energy services sector, in regional banking, in aviation and logistics — will create secondary property market opportunities that the attentive investor should be positioning to capture.

Caribbean Christmas: The Holiday Season Property Market

The Caribbean holiday season is, for much of the region’s resort and villa property market, the most commercially significant period of the year. The weeks from mid-December through early January represent the peak of demand, the peak of nightly rental rates, and — increasingly — the peak of investment inquiry as visitors who fall in love with the Caribbean during their holiday begin to explore the prospect of ownership. The 2019 season, based on advance booking data, appears set to be among the strongest on record.

In Jamaica, the north coast resort communities of Montego Bay, Ocho Rios, and Negril are operating at near-capacity through the holiday period. The major all-inclusive resorts — Sandals, Iberostar, RIU, Couples — are fully committed, and the villa rental market is equally tight. Property managers across the Montego Bay area report that their December inventory was committed by October, with some premium properties attracting bookings for the Christmas-New Year week as early as the previous January. Nightly rates for luxury villas are tracking at their highest levels in five years.

Barbados’s Platinum Coast — the parishes of St James and St Peter along the island’s west coast — is experiencing its customary transformation into one of the Caribbean’s most rarefied social environments during the Christmas season. The intersection of long-established British aristocratic and celebrity visitor patterns with a growing cohort of North American and international ultra-high-net-worth guests creates a micro-market in December that operates by rules quite distinct from the rest of the year. Villa rates in Sandy Lane, Paynes Bay, and Mullins Bay are at premium levels, and the knock-on effect on local retail, restaurants, and services is substantial.

St Lucia, Turks and Caicos, Antigua, and the US Virgin Islands are all reporting similarly strong advance booking positions for the holiday season. The recovery of Caribbean tourism from the disruption caused by Hurricanes Irma and Maria in 2017 is now essentially complete in most affected markets, and the full-year 2019 performance — tracking toward a record 31 million stayovers — reflects a region that has emerged from that difficult period stronger and more resilient than before.

Bahamas Reconstruction: Progress Amid Immensity of the Task

Three months after Hurricane Dorian’s catastrophic passage through the Abaco Islands and Grand Bahama, the reconstruction effort is gathering organisational momentum even as the full scale of the challenge becomes clearer. The storm, which made landfall at Category 5 intensity with 185-mile-per-hour sustained winds — the strongest on record at landfall in the Atlantic basin — caused damage estimated at USD 3.4 billion across the two most affected islands, displacing more than 70,000 people and destroying an estimated 70 percent of structures in the Abaco settlements of Marsh Harbour, The Mudd, and Pigeon Peas.

The Bahamian government, under Prime Minister Hubert Minnis, has been working to establish the institutional framework for reconstruction: zoning decisions, building code revisions, environmental assessments, and the channelling of international donor and insurance capital into organised programmes. The Inter-American Development Bank has committed significant funding, the United States has provided emergency assistance, and Caribbean regional institutions have contributed to the relief and early recovery effort. The insurance claims process for private property is complex and, for some owners, contentious, but payouts are beginning to flow.

For property investors and professionals, the key question in Grand Bahama and Abaco is not whether to rebuild but how — and to what standard. The arguments for building to significantly enhanced resilience specifications are compelling, even at higher upfront cost: the reputational and financial damage inflicted by a catastrophic storm on a tourism-dependent property market is profound, and the investment case for resort and residential property in vulnerable locations must be evaluated in full awareness of that risk. The Bahamas government has signalled its intention to update building codes for the affected areas, and international experts are engaged in helping design reconstruction standards that acknowledge the realities of a warming Atlantic hurricane environment.

Caribbean Investment Pipeline: Closing 2019 with Confidence

Beyond the headline stories of Guyana’s imminent first oil and the Bahamas reconstruction, the broader Caribbean investment landscape is closing 2019 on a note of genuine confidence. The regional development pipeline — hotel projects, residential schemes, commercial developments, and infrastructure investments — is substantial, and the financing environment remains supportive with US interest rates at 1.75% following the Federal Reserve’s October cut.

In the Citizenship by Investment segment, St Kitts and Nevis, Antigua and Barbuda, Grenada, Dominica, and St Lucia have all reported solid 2019 application volumes, generating capital that has flowed into approved real estate projects across the region. The CBI sector has become a meaningful contributor to Caribbean hotel and resort development financing, and its continued health provides a degree of investment certainty that is valuable to the development community.

Jamaica’s commercial real estate market is benefiting from the government’s sustained focus on economic zone development and private sector investment facilitation. The JAMPRO investment promotion agency reports continued strong interest from North American and European companies exploring manufacturing, logistics, and business process outsourcing operations on the island, and several significant announcements are anticipated in the first quarter of 2020. The Special Economic Zone programme — a key component of the government’s diversification strategy — is advancing, with several zone operators actively marketing their facilities to prospective tenants.

Caribbean Leaders This Month

Guyana (Georgetown): The pre-first-oil environment has already transformed Georgetown’s commercial market. When production commences — which could be any day now — the demand dynamics will shift from anticipatory to operational, accelerating an already remarkable property market trajectory.

Jamaica (Holiday Rentals): North coast villa and resort occupancy for December is at its highest in five years. Rental rates are at record levels and investment inquiry accompanying the holiday visitor flow is robust.

Barbados (Platinum Coast): The Christmas season brings Barbados’s most internationally prominent property market moment. Improving BERT programme metrics are beginning to attract cautious returning buyer interest alongside the seasonal rental premium.

St Kitts and Nevis (CBI): CBI application volumes for 2019 have been strong, funding a healthy pipeline of Park Hyatt and other approved development projects. The Federation closes the year with its programme in good health.

Turks and Caicos (Luxury): Providenciales December bookings are essentially sold out in the luxury villa segment, with rates at record levels. Capital values in the Grace Bay corridor continue to appreciate.

Trinidad (Commercial Port of Spain): Office market activity in the capital has been steady through November, with the LNG sector providing a foundation of commercial demand that offsets some of the natural gas production softness earlier in the year.

Dominican Republic (Punta Cana): November occupancy data confirms the strong recovery trajectory, with major resort operators bullish on the 2020 season and investment in new hotel capacity proceeding.

Overall Regional Performer — December 2019: Jamaica. Record tourism year closing strong, holiday season at peak, housing programme delivering, and commercial investment inquiry building — Jamaica enters the new decade with its strongest macro and property market platform in a generation.

Looking Ahead

The opening weeks of 2020 promise to be among the most eventful in Caribbean economic history. ExxonMobil’s Guyana first oil — which we expect to report as a confirmed achievement in our next edition — will open a new chapter not merely for Guyana but for the Caribbean’s investment story. The question of how the region’s property and financial community positions to benefit from the Guyana transformation will be one of the defining investment themes of the coming decade.

The holiday season will run through the first days of January, providing the traditional platform of owner-visitor encounters that generate the year’s first wave of property inquiry. Agent feedback from across the region suggests that the quality of that inquiry is strong — visitors arriving in December 2019 are, on the evidence of advance hotel and villa booking data, among the most affluent and investment-oriented in years. The conversion of that inquiry into transactions will be one of the key metrics for the Caribbean property market’s 2020 opening.

For Bahamas reconstruction, the first quarter of 2020 will bring important decisions on the design and financing of rebuilding programmes in Grand Bahama and Abaco. The choices made in those months — about building standards, land use planning, community design, and the role of private investment in reconstruction — will shape the character of those islands for decades. The Caribbean property community has both a professional interest and a civic responsibility to engage constructively with that process.

The Caribbean Property & Investment Review is published monthly. Edition 80 covers the period 3 November – 2 December 2019. All market data represents conditions during the coverage period. This publication does not constitute investment advice.

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