Cayman’s Construction Engine Kicks into High Gear
While Cayman’s tourism industry remains in a state of suspension, there has been a surge of activity on the construction side of the economy post-COVID-19 lockdown.
In July, 126 new project applications were filed with the Planning Department, the highest total for the year to date, according to Commerce Minister Joey Hew.
That figure bested the pre-lockdown February total of 121 applications.
Hew shared the statistics with the Cayman Compass Tuesday as he discussed the construction boom.
He said, given the challenges Cayman faces with the tourism industry, the ramped-up drive in construction is a welcomed sign.
“This actually speaks to not only the attraction that we have as a jurisdiction and the confidence that investors have in the country going forward, but it also goes to show that we have the right type of investors coming into the country,” Hew said during the Zoom interview.
He pointed out that across the world as economies plummet due to COVID-19, projects are being cancelled.
“Businesses [are] going bankrupt, but yet here in Grand Cayman on the construction side, we see an increase in the number of applications of projects and we don’t see any slowdown of the projects that were in process prior to the COVID pandemic,” he said.
It’s a point NCB managing director Matthew Wight agreed with in a recent Zoom interview discussing local industry trends.
He said while there is the obvious absence of revenue, with the borders being closed and thousands of people departing the islands, the flip side of that is the growing interest from investors.
“Ultimately, consumer confidence is what we have to maintain. Cayman has done an excellent job at [portraying] itself as a safe, healthy and strong economy. The government has positioned us well to weather such a storm. We’ve seen a lot of interest from the high-end investors, the high-net-worth individuals that look to Cayman as that kind of safe haven that they want to be part of,” he said.
The next steps, Wight said, are looking at when the borders reopen and when the economy and Cayman are “really able to thrive again”, and attract people to live and work here and thus contribute to the economy.
At this point for Cayman, the construction industry is an economic engine, which Wight said is “a necessity, it’s not really an option”.
“The development and construction economy has been with us for the last several years. We’ve been in very much a boom with lots of new projects. There’s been a lot of people coming to the island. The population has grown, [there’s been] a number of investors. So, there’s certainly been a demand for the supply, and [the] reality is it was a market which was trying to catch up with itself,” he said.
Dart CEO Mark VanDevelde, when asked for comment, referred the Compass to a recent article on Dart’s website, ‘CEO perspective: Optimism and investments as a catalyst,’ which outlined the company’s commitment to “facilitating sustainable economic activity” in Cayman.
He said, in the April article, that Dart’s “design and development teams continue to make solid progress on some of our pipeline projects”.
Dart has two major projects under way – the Cayman International School expansion, which is in the final stages, and a new commercial office and residential building at Camana Bay.
“These two projects alone will employ approximately 350 construction personnel and represent a minimum US$115 million investment in the local economy,” he said.
In May, Justin Howe, Dart’s president of real estate asset management, in another article featured on the Dart website, said the company is also looking at the feasibility of several other developments.
“We are actively exploring some incredibly exciting new opportunities and are confident they will drive future economic activity in the Cayman Islands,” he said.
Construction industry remains ‘robust’
While the mushrooming of investments in construction is a positive step, Hew said it cannot fill the void left by tourism “but it can start to help the government navigate through the difficult waters we have ahead of us”.
Construction has a vital role to play in the economic recovery of these islands, Hew added.
“It’s a very robust industry at the moment. I feel that during this time for us to all work together, if they’re still making sales, if the demands are still there, then that has to continue. And that has continued to provide funding to the government,” he said, adding that this additional money enabled government to help people in need, particularly workers in the hospitality industry.
Hew said there is a growing number of development projects on the way, as indicated by a new burst of planning applications.
“What is very popular at the moment is … mixed use, where you have some retail elements along with residential. We see quite a number of projects popping up like that. They are in certain areas [and] they are being developed around each other. What you’ll end up having [is] a fantastic synergy of residential and retail and commercial,” he said.
Hew noted that during the curfew period, from March to May, applications for planning approval continued to come in.
“There were certainly no indications that any of the projects were not planning to move forward. I must say that this was all possible because of [the Department of Planning’s] online planning system, which we launched back in 2017. They were fairly [streamlined] throughout the entire curfew period, and were able to continue receiving applications and issuing permits,” he said.
The minister said that, at the height of the lockdown, the department conducted 379 plan reviews and 38 virtual inspections. A total of 148 continued planning reviews or applications for reviews were received, and 46 projects were submitted during that period.
In January, 81 planning applications were received, followed by 121 in February; just before the lockdown began in March, there were 91 applications, Hew said.
The number dropped to 36 in April, with 46 in May, 75 in June, and then a surge to 126 in July.
As for Dart, Cayman’s major developer and landowner, active projects are expected to help put around 800 people back to work on construction sites and inject US$115 million into the economy, according to the May Dart article on construction.
“In addition to employment, construction projects can also create commerce for a number of business entities that support development work, such as companies that sell construction materials or rent heavy equipment, as well as providing wages for the employees to spend in the local economy,” said Cameron Graham, Dart president development delivery and infrastructure, in that article.
“We also know that construction and development activity can also provide the government with revenue in the form of import duties, work permit fees and stamp duties on the sale or lease of property,” Graham added. “These are all reasons why we are keen to roll up our sleeves and get back to the physical work of construction.”
This construction activity and corresponding influx of duties and fees is also what is driving NCB, Wight said, pointing out that, together, local developers have about $1.8 billion worth of active projects.
The trickle-down effect of that investment through the economy over the next three years will be substantial, he said.
“The sales of those projects was in excess of $800 million. There are buyers waiting,” he added.
While some within the construction industry suggest a reduction in fees would help attract more investment, Hew believes there are others who feel the opposite way.
“I don’t think we’re at the point yet where we need to start – either from the development side or from the government side –… panicking and looking at how do we incentivise business,” he said.
The minister said the financial services industry is recruiting employees whose skills may not necessarily be found locally, and there are also a lot people who are considering domiciling in Cayman, which is driving a need for accommodations.
“There’s a lot of anticipation of what is to come,” Hew said.
With the increase in activity, the minister said he would like to see more recruitment drives locally from the construction industry. He said the sector should look at the young men and women who were involved in hospitality to “see if we can encourage them to come over into the construction and development industry and provide employment for them”.