Updated: September 2019 | By: Keith Spencer
Trends in the domestic and global economy set the tone for activity in the real estate and property development sectors, eventually trickling down to the facilities management sector as demand here is driven by cycles in these two related sectors. The World Bank and the International Monetary Fund (IMF) differ in their analyses of the performance and outlook of the Trinidad and Tobago economy. In its April 19, 2019 update, the World Bank revised its estimates for real GDP growth for 2018 from -1% to + 0.7%, largely as a result of updated data for both non-energy and oil and gas production, with its forecast for GDP growth for 2019 moving from -0.5% to +0.9% (World Bank Press Release No: 2019/163/LAC). The IMF’s comparative figures for GDP growth for 2018 is 0.3% and projected growth for 2019 is 0% (IMF World Economic Outlook, April 2019, p. 161). Although the IMF figures are more conservative than the World Bank’s, they both suggest marginal improvement in GDP performance in 2018.
However, their outlook for 2019 differs as the World Bank projects growth of 1.4 percentage points while the IMF projects economic growth 50% lower (0.7 percentage points). Irrespective of which agency’s figures are adopted, the trickle-down effects on the real estate, property development, and facilities management sectors are inevitable.
The trickle-down impact of GDP performance on activity in the real estate sector in 2018 was clearly evident. According to the Central Bank of Trinidad and Tobago (Economic Bulletin, Volume XX1 No. 1 January 2019), in 2018 the real estate sector experienced growth as evidenced by the growth in business lending to the sector. Leasing and real estate mortgage loans increased from a low of TT$5,715.3 million in Q1 of 2017 to a high of TT$6,879.9 million in Q3 of 2018. Correspondingly, consumer real estate mortgage loans increased from TT$12,669.2 in Q1 of 2017 to TT$13,785.6 in Q3 of 2018. Real estate mortgage lending was supported by a low-interest rate environment and substantial competition among banks. Residential real estate mortgage loans grew approximately 5.9%, while commercial real estate mortgages grew on average by 14.2%. Interest rates on new residential real estate mortgages stabilised at 4.8% in Q3 of 2018 compared to 4.9% in Q2. Interest rates on new commercial mortgages dropped to 6.7% from 6.9% during the corresponding period. The asking price for residential units did not vary significantly between 2018 and 2019. Table 1 summarises the average asking prices for residential units by types between 2018 and 2019 by region. West Trinidad continues to command the highest prices across all residential types, followed by central Trinidad.
In the public housing segment, acute shortage continues to be a major challenge both for the Government as well as the citizenry. One of Government’s initiative to address the public housing shortage is to stimulate the injection of private capital into housing construction, targeting the low- and middle-income market.
Two such public-private-partnership initiatives involve the construction of 5,000 apartment unitsover the next four years by China Gezhouba Group International Engineering Company Limited and 160 units by NH International over a three-year period.
According to the agreement reached between the Trinidad and Tobago Housing Development Corporation (HDC) and the China Gezhouba Group, the company will design, procure, construct, and finance the construction of 133 three-bedroom units and 71 two-bedroom units at South Quay, Port of Spain and another 120 three-bedroom units and 115 two-bedroom units at Lady Hailes Avenue, San Fernando at a cost of US$71.7 million during phase I of the project. In the second initiative, HDC and NH International have agreed to the construction of 120 three-bedroom and 40 two-bedroom units at Mt. Hope at a cost of TT$192 million.
The construction sector contracted, as evidenced by a decline in loans disbursed to businesses in the sector, by an average of 4.45% for the period April to September 2018, with activity in the sector estimated to have declined by 6.4% in Q3 of 2018 (Central Bank Economic Bulletin, Volume XX1 No. 1 January 2019This impacted the local sales of cement and building materials which saw a corresponding contraction in consumption. Employment in the sector is expected to decline. The major construction projects currently in the pipeline expected to be completed in 2019 – 2020 are the Curepe Interchange project and new malls at Trincity and Chaguanas.
In the commercial office space segment, the slowdown in business activities which began in 2016 has led to an oversupply due to curtailed demand. This has led to stabilising of the office rental market with the base rental rate in the range of TT$12.00 – TT$16.00 per square foot per month. The outlook for this segment for the short to medium term is for vacancy and rental rates to remain at current levels.
The facilities management sector is showing signs of maturing, with the two major players in the market offering integrated services and relying less on sub-contracted services. Still, a large number of companies are opting to provide for their facilities management services in-house, as evidenced by the frequent advertisement in the newspapers for facilities managers. The outlook for this sector is that very little change is anticipated in the short to medium term.
Overall, the outlook for the real estate, property development and facilities management sector is that no significant increase in activity is expected in the short to medium term, as the projection for GDP growth, though positive, is still marginal.
Construction of 5,000 apartment units over the next four years
Construction of 133 three-bedroom units and 71 two-bedroom units at South Quay
Construction of 160 units by NH International over a three-year period.
Construction of 120 three-bedroom and 40 two-bedroom units at Mt. Hope