GUAM – The military buildup helped drag Guam’s real estate market out of a decade-long slump and start a long-term growth trend, although the size, shape and speed of the growth are as hard to predict as the form of the buildup itself, according to Nicholas Captain, president of Captain, Hutapea & Associates real estate brokerage.
“The Guam real estate market is on a long-term growth trend because of the significant economic and population growth that we’ll experience as a result of this buildup,” Mr. Captain said in an interview with GuamBuildupNews.com. “How big? How much? How far? How fast? Nobody knows. But when you’re looking at virtually guaranteed significant population and economic growth, that’s going to put your real estate on a long-term growth trend.”
The planned transfer of at least 8,600 U.S. Marines and their support staff and families, along with investments to boost Air Force, Navy and National Guard facilities on the island over the next decade or so, promise to boost the island’s military population to 39,000 from 15,000, increasing real estate demand, according to government estimates. The federal wages and living bonuses would further help drive the boom on the island of 180,000, according to real estate experts.
“The commercial sector has remained characterized by a significant amount of vacant space” leftover from a slump prior to the announcement of the buildup in 2006, Mr. Captain said. “But we have seen positive growth over the past three or four years.”
Early excitement about the buildup caused an overnight rush in the real estate market beginning in 2006. But the hype outran the slower, more methodical arc of military planning, Federal Government budgeting, Tokyo-Okinawa relations and local infrastructure upgrades.
“The period 2006 to 2008 saw an initial spike in the commercial market caused by the initial discussions and expectations focused on the proposed military buildup on Guam,” said Christopher S. Murphy, owner and principal broker of The Real Estate Professionals LLC.
Then the 2008 global economic meltdown hit the market and “as the initial plans became increasingly prolonged, the market cooled off considerably during the 2008 to 2010 period,” Mr. Murphy said.
The growth has been cyclic “but starting in the second half of 2010, we started seeing market conditions rebound,” Mr. Captain said. “For the first quarter of 2011 we started seeing some real positive numbers and activity. In early 2011 some of our markets were actually starting to tighten up. … There was a lot less empty commercial space in the office and industrial markets in early 2011.”
A number of properties were sold or leased to military contractors. “DZSP 21, Parsons, PB Americas, all these companies that you read about that have been doing consulting and so forth have been leasing office space,” Mr. Captain said.
In the second quarter of 2011, activity in the commercial and industrial sectors of the real estate market slowed due to the earthquakes and tsunami in Japan and speculation about the pace and scope of the military buildup, he said.
“The whole economy’s been through a bit of an upheaval since the March 11 Japan disasters,” Mr. Captain said. “And of course the roller coaster news on the military buildup has added to a heightened sense of caution … on the part of the vast majority of business owners that are looking at making decisions on commercial real estate.”
As businesses have had time to assess the impact of the factors, “things are thawing out a bit and we’re starting to see some upticks in activity,” Mr. Captain said.
“The quality properties have increased in rental rates,” said Siska Hutapea, vice president of Captain, Hutapea & Associates. “New concrete warehouses with good design could get higher rates than a mom-and-pop industrial building would get. The metal industrial buildings in Tamuning Industrial Park are in a good location so they have experienced increased rent in the past five years or so and strong occupancy always.” Most military-related real estate activity in the commercial and industrial sectors has been in rentals and leasing as opposed to sales, she added.
Local companies are showing confidence in the buildup’s impact on the economy over the long-term, said Mr. Murphy.
“I see more local people buying,” Mr. Murphy said. “In some sense that’s a vote of confidence even though times are tough. Locals have a confidence in the buildup over a seven- to 10-year stretch for the island. People are trying to position themselves to take advantage of what comes our way in seven to 10 years.”
Mr. Murphy cited his own company as one that relocated earlier this year after purchasing the old Government of Guam Employees Federal Credit Union building in Maite.
“Other realtors are looking, too,” Mr. Murphy said. “Local businesses feel this is a good opportunity to buy their own property.”
Locally owned commercial buildings are also being built.
“We haven’t seen new office buildings for decades,” Hutapea said. Just during the past three years, several locally owned commercial buildings have gotten underway, she noted, including one owned by Coast 36o Federal Credit Union.
The space The Real Estate Professionals had been occupying in the Orleans Pacific Plaza in Tamuning was rented to Mortenson Construction which is, with joint venture partner Kiewit, a participant in the Navy’s $4 billion Design-Build multiple award construction contract.
“Mortenson’s head office had specific requirements,” Mr. Murphy said. “They wanted prime space, good access, good parking, a backup generator and Marine Corps Drive frontage.”
Image used in this article courtesy xedos4 / FreeDigitalPhotos.net