Siska S. Hutapea
President
Cornerstone Valuation Guam Inc.

Perhaps the biggest news in Guam for 2019 is the approval of H2-B workers for multiple projects outside the military fence. Gov. Lourdes A. Leon Guerrero in her January address to Guam Chamber of Commerce stated that all construction in Guam is military related, and it seemed that the federal government’s recent approvals for a single-family development contractor, among others, agreed with this statement.

This is welcome news to real estate in Guam. U.S. Bureau of Economic Analysis in November reported decline in Guam gross domestic product by 0.3%, primarily due to decline in private fixed investment, the construction industry. Strong demand backed by low interest rates and limited supply, courtesy of a lack of workers, have driven the median price of single-family dwellings to a record high of $294,000. 

Real estate transaction in 2019 (annualized based on 11 months of data) reflects a 14% decline compared to 2019 at $425.1 million. However, the 2019 sales volume is without a single transaction at more than $10 million. The largest transaction in 2019 is the sale of a 9.6-acre plot of land on Marine Corps Drive for $5.9 million. The buyer, a local family, proposed to develop mix commercial/residential development on this site near Micronesia Mall. 

The highest price for a single-family dwelling is recorded in 2019 on an 8,000-square-foot house once advertised in the Wall Street Journal. This custom house with a pool and basement along the Talo Verde cliff line sold for $3.75 million. The sale is just a tad bit shy of the most expensive house sold in Los Angeles in 2019 at around $150 million, the Chartwell Estate, a 10-acre, 25,000-square-foot French chateau built in the 1930s.

Land sales in the first 11 months of 2019 reflect the answer to the call of limited supply in housing. Land sales volume reflects $75.3 million and with 366 transactions. Three large parcels in Yigo sold in 2019 with unit price ranging from $22 to $47 per square meters, all proposed for housing projects. A cautionary tale of Guam market being so small and susceptible to large supply influx should be in the mind of the investors and building in phases is a sure way to enter the market and ensure success. 

Tamuning still dominates the sales volume with $27.5 million of the total land sales in 26 transactions. Yigo and Dededo dominates land transactions with 76 and 75 sales and $9.8 million and $9.6 million in volume, respectively. 

Five commercial buildings transacted in the first 11 months of 2019 with a total sales volume of $4.1 million, including a two-story former Fuji Ichiban building in Tumon that is currently under renovation for health-clinic-related use. Four industrial buildings exchanged hands in 2019 for a total sales volume of $7.6 million. This include a four-acre, former military-related barracks converted into SIFA Learning Academy in Tiyan that closed in January 2019 for $5.5 million.

Guam Community College acquired a metal warehouse facility built out for classes at $1.2 million. Renovation of the three-story, former Continental Airlines building on Marine Corps Drive by the MV Pangilinan Enterprises was completed in December, along with beautification of that section of Marine Corps Drive. More commercial/industrial owner occupant facilities are in the pipeline for constructions in 2020 and onward.

Tourism record breaking visitor arrivals in fiscal 2019 at 1.63 million made the hotel properties attractive for many local and off island investors in Guam. Lotte hotel, which was acquired in February 2011 for $24 million resold in December 2018 for $64.3 million is a poster story of the strong tourism industry.  Occupancy tax collection increased 5.1% in fiscal 2019 to $45.1 million, a 23.2% increase compared to 2015. Two large hotel sales in recent years reported extremely low cap rates. 

The high construction costs and tedious permitting made acquiring existing properties much more attractive. Capital with no place to go is one of the Urban Land Institute emerging trends in 2020 theme happening in Guam too. GVB is currently working on Vision 2025 that should be out within the first half of 2020.

Tsubaki Tower, which infuses local cultures into its design, is a welcome addition and expected to open in April 2020. Renovation of existing rooms and new ownership in the former Sherwood are expected to provide more quality rooms in Guam. Private sector placemaking efforts, such as DFS et. al with Pleasure Island in late 1990s/early 2000s, is a must in Guam, if we want to have more repeat tourists. 

Residential sector sales volume reflects a 7% increase compared to 2019, with the number of sales decreasing by 3.8%, with median price increased by 8.0%. The influx in local and off-island mom and pop investors in the past five years renovating condominium units into military subsidized levels caused oversupply in this sector. 

As of early December 2019, there are 606 single family and condominium units listed for rent on MLS with 79% asking $2,000 per month and more. We expect some units will have to reduce rent substantially to be attainable to tenants, some will be put on the market for sale and some will remain vacant. The ones put on the market will not stay long as demand for housing is still strong, especially for the $300,000 and below price range. 

Opportunities are still abound in 2020. Guam Economic Development Authority issued its Comprehensive Economic Development Strategy, which noted opportunities in agricultural, telecommunication and Opportunity Zones, among others. The report can be downloaded from GEDA website.

 Agat, Merizo, Umatac are among the 25% census tracts assigned as Opportunity Zones, and Guam has yet to see development related to this latest federal government effort to spur growth in low-income areas. New methods of housing construction to alleviate high construction costs are on drawing plan and will be great for Guam’s young populations. 

On my flight back to Guam, I sat next to a very interesting gentleman — a veteran of the Korean War — named Bill. He served in the Army until 1970 and upon his return, Bill had $4,000.  He said instead of buying a car stereo like most of his peers, he put his money towards a down payment for a four-plex in San Francisco. Bill had a vision. He has since acquired multiple properties, went through booms and busts in the real estate market, but kept his vision throughout. On a much larger and global scale, Singapore had a vision too, and the World Economic Forum just named Singapore the most competitive country in the world.

Having a solid vision enables one to wade through tough times and excel in prosperous time, and this holds true in real estate investment.