Real Estate Market Update 3rd Quarter 2023

Background Economic Conditions

Stakeholders in the private sector are calling on the Government of Jamaica to communicate and act swiftly to allocate the gains from the country’s macroeconomic
program, which resulted in the highest credit rating ever from Standard and Poor’s Global Rating (S&P Global) since it started rating the country’s debt in 1999.

S&P Global on Wednesday September 13 announced that it has raised Jamaica’s longterm foreign and local currency sovereign debt credit rating from B+ to BB- while
maintaining a stable outlook, citing the country’s commitment “to meeting its ambitious debt reduction targets during the pandemic and related contractions”. The ratings
agency said it expects the country’s debt to fall to 60 per cent of gross domestic product (GDP) by the end of fiscal year 2023/24, after reaching 64 per cent at the end of 2022.

“The benefit of this credit upgrade to Jamaica is that it provides the ability for Jamaica to get better terms on financing which can save a substantial amount of money in the long run leaving more room for spending on education, health, security and infrastructure. It also makes Jamaica a more attractive place to invest. This will lead to more
investments, more economic activity and more jobs for Jamaicans,” Dr Nigel Clarke said in reaction to the news.

The World Bank has announced that based on trends to the end of September 2023 global economic growth is expected to be three (3) percent. Unfortunately, the norm for economic growth in Jamaica, during the past three decades, is below international
levels.

On September 29, 2023 STATIN announced the following information:

1. 1.  The economy grew by 2.3 percent during the second quarter April –June
      2023.
      
      1. Services grew by 2.2 percent. The best subsector that experienced
         growth was Hotels and Restaurants – 7.8 percent. In contrast Real
         Estate increased by 1.8 percent.
      2. Goods producing industries grew by 2.6 percent.
   2. Annualized Inflation at the end of August was reported as 6.8 percent. This
      is a positive trend compared to the inflation rate of 10.2 percent in August 2022.

STATIN also reported that the reopening of the JAMALCO Alumina plant was a major in the 164 percent increase in Mining & Quarrying sector.

The Real Estate Sector

Jul 21, 2023 One Belmont, a 78,790 sq ft J$3.7Billion commercial development project that the developer reported to be 100 percent committed to tenants. The target date for “practical completion” in September 2023 was not met.

At least four similar buildings are under construction on Hope Road and in New Kingston.

We believe the “upscale” office market will be saturated unless there is economic growth exceeding the paltry two (2) percent that is forecasted by STATIN.

As previously reported, the demand continues for warehouses and the distribution trades. The construction of the built-to-suit industrial warehouse facility on Spanish Town Road by SYGNUS is reported to have achieved 99 per cent completion and SRF received the security deposit during the quarter based on a 10-year lease.

Kingston Wharf Limited ongoing efforts to add more warehousing space as seen by the construction of its over-US$25 million 300,000 sq. ft. state-of-the-art energy-efficient Ashenheim Road complex in Kingston, that is scheduled to be completed during the first quarter of 2024. PriceSmart has agreed to lease 44 percent of this facility for 10 years with two options to renew, each for five years.

The owner of the FOSRICH complex on Molynes Rd. continues work on the expanded manufacturing and warehousing facility. Another major storage and retail complex is nearing completion in the Three Miles area of Hagley Park Rd.

Resulting from the high vacancies we have observed in the mid-tier (priced above J$35M two-bedroom apartment units) and the ongoing construction in this market sector, we believe a “shakeout” would be on the horizon were it not for purchases by the “new” institutional real estate investors. In the local market, real estate will appreciate even with the lack of rental income.

There continues to be good demand for housing units that are priced under $25M. The fallout expected by the increased mortgage interest rates in 2022-3 has so far been minimal.

IBH/WIHCON Properties Limited ‘Oct. 17, 2023