Strong Construction Industry To Drive Guam's Economic Growth in 2018

Despite delays in military build-up, activity continues

By Mar-Vic Cagurangan

HAGÅTÑA, Guam (Marianas Variety, June 7, 2017 ) – Despite the federal clampdown on the issuance of foreign worker visas, the surging construction activity on Guam will drive the island’s continued economic growth in 2018, according to government’s chief economist Gary Hiles.

“Investment in new buildings and infrastructure remains high as evidenced by historical and comparative measures of construction levels on Guam,” Hiles said in the 2018 Guam economic outlook report.

Guam’s economy has been consistently posting a 2 to 3 percent annual growth since 2003. The island’s economy is fuelled mainly by tourism and the military — both require the construction of new facilities to accommodate the Marines’ relocation and the increasing number of tourist arrivals.

In 2016, the government of Guam approved building permits for projects worth a combined $470.8 million. The Department of Defense is expected to award $248.65 million worth of projects in 2017.

“While substantial delays and changes in plans have occurred with the preparations for the Marine Corps relocation from Okinawa to Guam, and challenges remain to be overcome, preparatory work continues to progress,” Hiles’ report said.

“Volatility in defense construction activity has been counterbalanced to an extent by strong private and Government of Guam construction activity,” the report said.

Civilian projects that are either ongoing or ready for groundbreaking amount to $622.28 million.

About 10 percent of the island’s total employment is in the construction industry.

“It is also a strong leading indicator of the economic activity to come with construction and other employment and activity in the projects as they are completed,” the report said.

Among the big-ticket ongoing civilian projects include the $180-million Tsubaki Hotel, a 26- story 340-room, five-star luxury resort being constructed by P.H.R. Micronesia Ken Corp. and the Emerald Oceanview Park, a $100 million four-tower development built by Core Tech.

The Landmark on Marine Corps Drive, a 21,000 square-foot two story structure at the Marine Corps Drive and Chalan San Antonio intersection with an estimated cost of $6.1 million is expected to be completed this month.

A number of major projects are in the planning phase for development. These include: The Northgate MarketPlace, a shopping and restaurant complex directly across from Guam Regional Medical City in Dededo, aims to create nearly 300 retail and food service jobs upon completion. It is funded in part by federal grants through the Guam Housing and Urban Renewal Authority with a total project cost estimated at $12 million.

A low-income housing tax credit financed project has been approved by GHURA for Summer Town Estates Phase III will have 66 low-income units located at the old Lada Estates. Villa Del Mar LLC plans 50 units off the Kanada-Toto Loop for low income families and homeless veterans. It is to be funded by a federal tax-credit program. GHURA awards tax credits to developers under the program. The estimated cost for both projects is about $50 million.

However, the construction industry is still dealing with the challenge of convincing the federal government to ease the new restrictions on H2-B visas and restore the exemption from the national visa quota previously afforded to Guam.

Historically, Guam was exempted from the 66,000 H2 visas a year quota nationwide in consideration of the military buildup vis-a-vis the island’s scarce labor pool.

However, since December 2015, the visa-approval rate has gone down to zero. As of April, the number of H2 workers on island is down to 139 from 1,463 last year.

According to the U.S. Navy’s environmental impact statement, the operative number of required workers at the peak of the military buildup is 5,000 people.

“The economic demand and contractual construction obligations are likely to attract and expand the construction labor force either with some liberalization of H-2 visa approvals or other recruitment activity when the current uncertainty about the outcome of the H-2 visa denial court case and political efforts with the federal government are more settled,” Hiles said in the report.

“Efforts to exempt buildup projects from this tightened policy were not successful in the U.S. Congress in this year’s defense appropriation act. The issue is in litigation by affected contractors.”

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