Market Update September 2012


As published in the Caymanian Compass – 5 September, 2012

Cayman will reap the benefits of the new West Bay bypass

Back in May I wrote briefly about the development of the existing Esterly Tibbetts Highway by the Dart group through the ForCayman Investment Alliance and this month I would like to take the opportunity to write in more depth on this important project.
I believe the extension of the existing bypass all the way northward up to Batabano Road will be a wonderful boost for the country as a whole for many reasons. By splitting the work between the Government’s National Roads Authority and local companies, the ForCayman Investment Alliance has ensured work for Caymanians while keeping costs down. At the same time many local businesses will be involved in the project, which will ensure a further boost to the economy. 

Land ripe for development

But the primary benefit of such a venture is that the development will create land on the coast side that will now be deep enough for development. When the section of West Bay Road is closed and traffic diverted to the new extension road, the land that was previously split by the road will have direct beach access, making it more usable and valuable. This is for two reasons:

Buildings on the beach front have to be built a certain distance from the beach: the higher the building, the greater the setback. This is to control density of usage of the respective beach front.  With the road removed, the parcel of land becomes more useable as it will now have greater depth, as in some areas it was as narrow as 120 feet. As there is more space from the high water mark, an investor can now build up to 10 storeys, increasing their potential revenue per square foot of the foot print of the building.

Secondly, because the hotel will be beach front, much higher rates can be charged than one that does not have direct access to the beach.
It will be interesting therefore to compare the value of the land in question now verses the future when the land becomes far more attractive to developers, to my mind increasing by a multiple in the process, especially with the Government raising the elevation of new construction along Seven Mile Beach to ten storeys.

Developing the frontage in this way will ensure that the entire country benefits, as Government will be able to reap the gains from additional duties. In addition, the ForCayman Investment Alliance will be redeveloping the old hotel with a new brand on the site. Even though the developers have been granted discounts on duties in the short term I believe the long term gains of such an investment far outweigh the initial discounts. For example, the new hotel development has its own unique brand, which brings with it a faithful clientele that likes to stay true to its brand. This means a whole new set of visitors to the island, looking to experience their favourite brand here in Cayman, just as the Ritz-Carlton, Westin, Hyatt (of old) and Marriott all brought in their own clientele. This can only be a tremendous plus for the island.  Historically, every time a new hotel has been built, the number of real estate transactions and property values along Seven Mile Beach has also increased. So, besides the fact that this hotel will bring its loyal clientele, once they visit the island and come to like it, some usually invest in property.  In addition, the hotel will add jobs and increase demand for goods and services such as food, restaurants, entertainment, and so on where the revenue spreads through the local economy.

This all comes at a time when George Town is feeling the disastrous effects of the decline in cruise ship passenger numbers and those passengers who do visit Cayman are spending increasingly less in our stores and restaurants. Anecdotally I recently heard one cruise ship passenger say that they had come ashore without a penny on them!  Stayover tourism has to be the mainstay of our tourism economy and also provides the opportunity for us in the real estate industry to target potential new investment.

The size of the land that will be created near and around the new hotel lends itself well to further development of other hotels, conference facilities and even offers Cayman the opportunity to become a golf destination – a very large market of high net worth visitors.

Benefits for existing residents

Additional benefits to the new development will be the easing of congestion on the roads connecting West Bay and George Town. The ForCayman Investment Alliance is developing a four-lane highway and a cycle path which will see a dramatic reduction in traffic for condo owners along the coastline as traffic moves to use the bypass which, I believe will enhance the quality of life for residents by reducing road and traffic noise and thereby creating a more tranquil environment. Sadly the district of West Bay in the past has not benefitted from its real potential. For those of us – including me – who have lived in West Bay there is a great community feel about the area, not to mention the stunning views of the coastline or from the coastline. I believe the ease of which people will be able to commute out of West Bay to George Town will open up the benefits of the district to many more people with the added benefit of increasing property values in high end areas such as The Shores, the north side of West Bay and the Papagallos area.

At the end of the day I believe the new bypass extension will have an extremely positive impact on the Cayman Islands in many different ways. That said, to enhance the flow of traffic from West Bay to George Town even further, I would also propose that Government increase the width of the current bypass that exists from the Butterfield roundabout to the Old Hyatt roundabout to two lanes each way, thereby reducing the bottle neck that occurs during rush hour when two lanes merge into one.