The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Construction remains “strong and healthy” despite 2023’s $128m decline in the value of new building starts, a prominent contractor argued yesterday, with cement block demand “outpacing” production.

Leonard Sands, the Bahamian Contractors Association’s (BCA) president, told Tribune Business it was “too early to draw a conclusion” from yesterday’s release of Bahamas-wide data which revealed declines in both the number and value of construction permits and starts for 2023. The only category showing some year-over-year improvement was construction completions.

The data, unveiled by the Bahamas National Statistical Institute (BNSI), revealed that the combined value of total construction starts in 2023 - for both residential, commercial/industrial and public sector projects - slumped by $128.055m or 38 percent compared to 2022, falling to $212.105m as opposed to $340.16m in the prior year.

The total number of new building starts was also down by 9 percent at 491 versus 542, a fall of 51. In particular, the number of new residential building projects dropped from 488 to 433 in 2023, representing an 11 percent decline compared to the prior year, while the value of such projects dropped by 46 percent or $136.373m to $158.256m.

While the number of commercial building starts was exactly the same, the value of these projects dropped by $16.362m or 38 percent year-over-year from $42.586m in 2022 to $26.224m last year. However, the number of new public sector construction projects doubled to eight last year, with their combined value increasing from just $2.946m in 2022 to $27.626m last year.

As for new construction permits, these declined in total value by 7 percent or $73.194m year-over-year in dropping from $988.76m to $915.566m. The number of permits issued also fell by 4 percent or 65, dropping from 1,584 to 1,519. 

While the combined value of new residential construction permits rose by 31 percent or $130.903m, year-over-year, the number of approvals was down by 6 percent at 1,195 versus 1,266 in 2022 - a difference of 71. And, while new commercial/industrial construction permits increased from 278 in 2022 to 285 last year, their combined worth slumped by 43 percent or $231.255m from $539.516m to $308.261m.

The data was again boosted by new public sector construction projects which, although remaining flat in terms of the numbers issued, near-doubled in value from $28.867m in 2022 to $56.024m - a gain of $27.157m or 94 percent. This indicates that, while the average value of commercial/industrial projects had fallen year-over-year, that for the public sector had increased significantly in 2023 compared to 2022.

Mr Sands, though, told this newspaper it is “too early” and “too difficult” to interpret the data as confirming that Bahamian construction industry activity has slowed. While acknowledging that the figures may show the sector returning to more typical business volumes following the surge created by pent-up demand post-COVID, the pipeline signalled by new construction permits indicates almost $1bn in future activity.

The BCA president added that many developers, both foreign and local, may also hold-off on initiating real estate and construction developments until the outcome of November’s US presidential election is known as they will then be able to better gauge the policy direction that will impact The Bahamas and their overseas clients.

“The data is very tricky to interpret that way,” Mr Sands replied, when asked by this newspaper if it shows a construction slowdown. “The data on the ground, for all intents and purposes, is construction is faring really well and strongly.

“I spoke to a few retailers in the cement block production space today, and demand is outpacing production for the most part in New Providence. So much so that the BCA has been contacted and I spoke to some persons interested in establishing another block distribution plant in The Bahamas because the demand is so strong.

“If block demand is outpacing supply it must mean a lot of block work is going on, which means a lot of construction is going on.” As for the $128m decline in the value of new building starts, Mr Sands said: “While we may have a lot of new construction, the value of that construction appears to be less than 2022.

“What does that data tell us? Does it mean persons are starting to feel a bit of a pinch, and starting to do smaller projects and not bigger ones? Does it mean that a lot of pent-up projects have been released but these are not large ones? I wouldn’t say it’s a negative in any way.

“It’s very difficult to interpret the data. It’s too early to tell just from the raw information we are looking at. You have to really analyse what what are the real underlying factors around the numbers we are seeing. It’s not something you look at on the surface and draw a conclusion. That would be erroneous.”

Mr Sands agreed “you could draw that conclusion” when asked if construction activity was returning to more typical levels following the post-COVID boom, but added: “There’s still a lot of projects waiting to happen. We do have some economic and political factors coming into play.

“There’s an election coming up in the US, so persons are waiting until after November. Foreign investors and privately-owned residential buildings, they’re waiting to see the outcome of the US presidential election. That’s going to be a determinant of how much of an increase or decrease we see in construction.

“It determines what Americans and second home owners do. Investors wait and see. If it goes the way they desire it to go, we will see a lot more movement. We wait until after that date to determine construction activity. Right now, it’s too early to draw a conclusion as to what the data means. It’s not that bad; the spread [between 2023 and 2022] is small.”

Mr Sands said there is “no doubt” that the 2023 data shows the Bahamian construction industry maintaining robust business volumes. “Construction activity is strong and healthy in most quarters,” he told Tribune Business. “Persons active in the space have sufficient work and still, for the most part, there’s a shortage of labour in the islands where most construction is happening.

“I think that activity is still steady and the sector is doing well. It would to have registration of contractors and regulation of the construction industry but, as the status quo exists, construction activity is pretty strong throughout The Bahamas. 

“We’re still waiting to see if we have some movement with respect to the Board for the Construction Contractors Act. We’ll also see how this deal shakes out with the new New Providence hospital. We’re going to keep our eyes on it because we believe more Bahamians can participate in building this hospital.”

According to the BNSI data, only construction completions showed any year-over-year improvement in 2023 as they increased in number by 6 percent, or 43, to 743 from 700 in 2022. But, in terms of value, these fell by a combined 10 percent or $43.922m, coming in at $391.53m compared to $435.452m in 2022.

The value of residential and commercial/industrial completions fell by 8 percent and 22 percent, respectively. The former declined by $16.942m, from $205.356m to $188.413m, while the latter category dropped from $226.547m to $176.166m in 2022. However, the total value of completed public sector building projects rose by $23.402m year-over-year to $26.951m.

The Statistical Institute, confirming that its report is compiled using data supplied by the Ministry of Works, Grand Bahama Port Authority (GBPA), Family Island administrators and the Local Government Department. 

“The total number of construction starts in 2023 showed a decrease of 51 projects when compared to 2022, moving from 542 to 491 projects started,” it said. “There was also a decrease in the total value in construction starts of $128m. The private/residential sector led the decrease in the number and value by 55 projects and $136m respectively.

“The commercial/industrial sector remained at 50 projects started, but the value decreased by $16m. Conversely, the public sector had an increase in both the number and value of projects started. The number of public projects grew by four projects, while the value increased by approximately $25m.”

As for completions, the Statistical Institute added: “The total number of construction completions showed an increase of 43 projects when compared to 700 projects completed in 2022 versus 743 in 2023. There was a decrease in the total value of completions of approximately $44m.

“The decrease in value was led by the private/residential sector, which decreased by $17 million, while the number of projects in this sector grew by 17. The commercial/industrial sector also decreased in value by approximately $50m with an increase of 23 projects completed. The public sector experienced increases in both the number of projects completed of three, and value of $23m, when compared to 2022.”