By Chad Clinton Communications Manager, Americas (RICS)

Although the Caribbean has long been seen as a place to soak up the sun, in recent years there has been a surge in interest in from large US corporations and foreign investors interested in real estate and ‘other-than-tourism’ business opportunities.

Caribbean destinations like the Cayman Islands have been recognized not only for their pristine natural beauty, but also as sophisticated, financially sound international business centers.

Highly competitive on a global scale, the Cayman Islands is the world’s sixth largest banking center and the number one hedge fund jurisdiction, according to Cayman Enterprise City. In 2011, they negotiated an exclusive 49-year agreement with the Cayman government to have a special e

conomic zone which houses a cluster of industry-specific business parks on one campus. The agreement is designed to attract international businesses and offers more incentives than are normally allowed under a Cayman business structure.

As well as no corporate tax, no capital gains tax and no income tax, international businesses can also benefit from no import duties

and five year work/residency visas along with a fast 10 day set-up process. International companies are looking for a place to enjoy more efficient tax structuring and a ‘lighter touch’ regulatory environment. The zone strips away the red tape that was previously an impediment.

Hilary McKenzie-Cahill, Vice President of Marketing and Business Development, Cayman Enterprise City

To date, Cayman Enterprise City has signed up 43 international companies who have either moved into the zone or will soon. These are primarily North American technology and new media firms, but McKenzie-Cahill says there has also been a good response from commodities companies and traders in the US and Latin America.

Its close proximity to major US cities makes the Caribbean an appealing destination for outside businesses. The Cayman Islands are located just three hours from New York City and one hour from Miami – both hubs to some of the world’s largest companies.

Traditionally, the US is the biggest investor in the region. However,  the Caribbean has seen a significant rise in other foreign investors, according to Jim Andrews, Managing Director of Integra Realty Resources’ Caribbean office and senior advising member of the Royal Institution of Chartered Surveyors (RICS).

The Export-Import Bank of China, owned by the Chinese government, is financing and developing large projects in the Bahamas as well as cruise ship berthing facilities and surrounding commercial development throughout the region, Andrews noted. “We believe this is forming the foundation for more direct Chinese and other investment in the Caribbean in the coming years,” he said.

It appears that corporations and investors simply look for the best overall business environment for their bottom line and places like the Caribbean have moved to the top of many firm’s radar around the world.

In 2012 RICS ran a study in nine of the largest global financial centers looking at why investment and businesses locate in one area rather than another. The key conclusion was that corporations and investors value a coherent offering from policy makers that shows a city or country is open for business.

Places where appropriate tax rates, good transport and digital infrastructure, streamlined planning regulations and skilled workers are all present make far more appealing places for a corporation to locate than fragmented, bureaucratic cities or regions.

RICS members, as strategic real estate advisers to governments and businesses, are ideally placed to help create these environments and help attract capital to a location.

Tom Pienaar, Head of Corporate Affairs, RICS Americas

For more on this topic, download the publication ‘Corporate Real Estate: Investment and Global Cities’ at the foot of this page.

Caribbean real estate professionals embrace standards and regulation

The Caribbean real estate market has historically shown poorly in its structure and professionalism, according to a group of real estate professionals polled from different parts of the region.

“In recessionary times, which we’ve experienced over the last five or six years, it’s become more and more important to have standards in place to ensure that professionals are operating within a uniformed structure,” said Uche Obi, Senior Valuer of Cayman Islands Government Land and Survey Department and RICS senior member. “The structure includes both education and guidelines to support and promote the integrity of the real estate sector.”

In Jamaica, standards and regulation tie in well, since education and professionalism are needed. End-users want to feel comfortable with the quality of work they receive from real estate professionals.

Eric Allen, Commissioner of Land Valuations in Jamaica, National Land Agency

Allen, who also serves on the Caribbean Board for RICS, indicated that RICS standards are even being recognized favorably by the government: a major accomplishment in an area that has seen its share of government turmoil.

The ultimate goal for RICS standards to be recognized throughout the Caribbean, so that real estate professionals must be RICS registered and end-users can feel secure.

“There’s strong demand for RICS standards and regulation,” Allen said. “We’re getting support from some legs of the government for more accredited RICS professionals, but the next phase is to get support from policy regulators, which will be the big win.”

The question, says Allen, is how to get that support. “Our numbers are definitely growing. We have about 100 members, which is enough to show that standards are wanted.”

While the desire for standards appears universal by the real estate professionals who were polled, questions governing standards in the Caribbean remain. “Market transparency has to be present in order to get the most from standards and that comes down to a question of self-regulation versus external regulation,” thinks Allen.

Many Caribbean real estate markets have never had a requirement for licensed practitioners, making the move toward uniformed standards a work in progress.

In Barbados, for example, the real estate market has been “contentious” according to Wayne Forde, Commissioner of Land Tax of Barbados. In the valuation discipline of real estate, “there are no standards guiding the profession, yet. Over the last decade, there’s been a lot of development, with a lot of foreign investments being made.”

In other words, people who are likely unqualified are providing services to end-users with no recourse for the quality of their work on a project.

As membership continues to increase, we’re able to advise government as a chapter, which gives our message regarding the need for standards more credibility .The more you have in numbers, the more vocal and impactful you are when seeking government support.

Uche Obi, Senior Valuer of Cayman Islands Government Land and Survey Department and RICS senior member

In the Cayman Islands, where the standard of living and the infrastructure is much higher than in many other Caribbean islands, RICS is establishing itself in the marketplace and making major strides in partnering with banks and government.

For example, the Cayman government and two major banks have adopted the Valuers Registration Scheme, established to regulate the standards of valuations prepared by members. A significant number of members have signed up to the program.

Along with every other discipline within the real estate industry, many of the valuation professionals will meet at the Cayman Islands Property and Construction Conference on 28 February 2013. The conference will look at ways in which property and construction professionals can enhance the industry.

Having RICS accreditation has improved the quality of work for many colleagues, who previously took a “laissez-faire” approach to their craft. It’s obvious that being RICS registered has also increased the overall professionalism in the market place and encouraged more people to want to become members. There are still a number of real estate professionals who should be RICS certified who aren’t. We’re not done yet though.

Eric Allen, Commissioner of Land Valuations in Jamaica, National Land Agency

Obi also highlighted the need to enhance the infrastructure on many Caribbean islands, and the opportunity to help extablish best practices that could be duplicated by governments across the region.

“In the Cayman Islands, the Owen Roberts International Airport needs to be expanded to accommodate long-haul flights and a cruise berthing facility constructed. However, government doesn’t have the funds to provide these infrastructures, so the public-private partnership (P3) model is being explored,” he added.

Obi believes that P3s are the best way for governments in the Caribbean to get develop these projects, and that RICS professional members can play a vital role in advising government as well as being part of the development team.

This form of procurement has become an increasingly popular way to provide infrastructure projects over the last decade or so. In the Caribbean, Chinese firms have played a significant role and are now used in over 40 countries. However, concerns that the funding structure shifts the provision of public services and essential infrastructure to the private sector, thus allowing them to profit from public money, remain.

Global summaries and recommendations for addressing the P3 concerns can be found in the report The Future of Private Finance Initiative and Public-Private Partnerships.