Tough year for construction and development

The Cayman Islands construction and development sector is coming off another weak year, with many companies surviving on cutbacks and whatever work they can secure. Some industry professionals are hopeful that business will boom again in 2012 courtesy of public-private partnerships such as the ForCayman Investment Alliance, Cayman Enterprise City, Dr. Devi Shetty’s tourism hospital and the George Town cruise port. 

 

The anticipated impact of the major construction projects isn’t limited to the projects themselves, rather the expectation is that if the projects proceed, they will generate collateral development activity in support of the projects, or as a result of a more sanguine environment generally. So even if particular contractors do not get a piece of action in the major project, they can potentially take advantage of other opportunities that wouldn’t have arisen without the major project. 

 

Looming capital projects 

“My outlook for 2012 is much the same as it was last year for 2011, as much as I’m waiting to see the start of these capital projects and the trickling down into the economy,” said Dean Scott, managing director of Island Builders. 

Scott said the most significant project in the works is the ForCayman Investment Alliance between the Dart Group and government. Next in significance is Cayman Enterprise City, then the proposed Narayana Cayman University Medical Centre. Scott did not believe the George Town cruise pier arrangement with China Harbour Engineering Company would generate many local construction jobs. 

“Once they start and if they are delivered as promised, it will rebound us out of the recession before the US recovers, so that when the US recovers we will be prepared for a continuation of sustainable development,” he said. 

David Kirkaldy, president of Massive Equipment Rental and Sales, said the prospect of several major projects occurring simultaneously bodes well for construction equipment rental businesses. 

“I am very bullish that available capacity will be taken up very quickly and developers will again see the need to start projects that are on hold or parked, which will get that sector going again,” Kirkaldy said. 

“As a rental company what I’m hopeful for in this economic turnaround we’re anticipating in 2012, is that while there is certainty for a period of time it’s not the type of grand scale of reconstruction that was needed after Hurricane Ivan. There’s a lot of work to do but on a project-by-project type basis, and hopefully that will lead to more rentals for equipment as opposed to outright purchasing, which will be good both for ourselves and other businesses involved in the rental sector,” he said. 

 

‘Survival of the fittest’ 

In its Semi-Annual Economic Report 2011, the Economics & Statistics Office wrote that building permit values totalled $99.5 million as of 31 July, 2011, a decline of more than 21 per cent compared to the previous year. That followed a 28 per cent decline recorded in 2010. The value of building permits were at the lowest level since 2005. 

“Construction indicators in the first six months of the year recorded one of its weakest performances in six years with building intentions trending downwards,” according to the report. 

The lone bright spot noted in the report was the government’s upgrading of primary school infrastructure. 

Architect Rodney Frederick of Frederick + McRae said, “The residential aspect of the market has seen clients proceeding with some small homes or creating small additions to an existing family home. This is likely because of an abundance of labour being available and the loan rates offered by the banks. 

“The building industry has generally been slow, barring a few large projects that had been slated for some time,” Frederick said. “Some of the smaller projects that we are seeing are taking or have taken opportunity of the duty concession on material and equipment imports. A few construction companies have developed their own projects and are utilising their own labour force, thus keeping their workers employed.” 

Scott, whose company was involved in projects this year including the Courtyard by Marriott demolition, public schools and smaller private developments, said 2011 was his best year ever in 15 years, 

“I planned ahead and had a banner year,” he said. 

“It’s survival of the fittest. It took a lot of hard work and determined follow-throughs, and promising and delivering, keeping my head down and becoming a reputable medium-sized contractor,” Scott said. 

Scott’s not relying on other people’s projects for business in the upcoming year. He’s obtaining planning permission to build a subdivision in the Savannah-Newlands area called Saddlewood Estates, a $15 million development of 70 affordable homes.  

“Basically, it’s the work that I can count on. Other people’s developments, if it happens it happens. If not, then I’m up to four-dozen employees and I can sustain them for a full year just on that,” he said. 

 

Picking up in 2012 

McRae said the year has ended on a relatively strong note. “The latter part of this year has seen the commencement a few large building projects which are good signs,” he said. “Some small companies like ours have managed to keep themselves busy albeit not being overwhelmed with a large body of work.” 

He said, “We believe that 2012 will continue to see steady growth in the work load and we believe the industry will become generally busier later in 2012.” 

Kirkaldy said, “We’ve had to scale back on our staffing with the effect that we’ve reduced staff by about 15 members over the past two years. I see 2012 as an opportunity to set us on a course for growth again.” 

Scott said, “Right now there are a lot of individuals hurting, a lot of businesses hurting. We hope that the government can do what it can to get these projects off the ground without bringing in foreign labour and without sacrificing local services that are available including plants and equipment. Our services, skilled labour and equipment are available. They should be fully utilised. Otherwise who are we developing for?” 

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