Market boom leaving inventory bare
There is just not enough product to meet the demand for purchase. Now that’s a line you don’t hear very often – in any industry – but this is the reality facing the yachting world in 2021. Lack of inventory is not such a bad problem to have.
After an unexpected rise in activity following the onset of last year’s pandemic, the industry has seen little deceleration aside from a post-summer seasonal lull. One anonymous broker told Superyacht Investor (SYI) he already knows he is going to be profitable until 2023 off the back of his new-build order book, whilst many shipyards are booked up until 2025 and beyond.
Another broker, George Jousma, president, Italian Yacht Group told SYI: “In over 40 years in the business I have never seen anything like it and I’ve had some good times”. When Covid-19 hit in March 2020, he told his business partner and son, Boomer Jousma, to hunker down and prepare for the worst. “About two months later he’s looking at me and saying ‘What were you trying to tell me?’”
Italian Yacht Group, with offices in New York and Florida, focus largely on the eastern US market and activity has been up all over the map, said Jousma. “As an industry in the States, the market seems to be hot from $20,000 wave riders to mega yachts.”
Almost without exception then the issue becomes a lack of inventory, closely followed by where to keep the yacht once you have it and finding the right people to run it, said the Florida-based broker. “We honestly could sell more boats right now but there is a lack of them.”
Last year the US saw a 9% increase in sales compared with 2019, according to the fourth-quarter report by the National Marine Manufacturers Association (NMMA). Demand for marine products and services reached $47bn, a 13-year record increase in boat sales.
Jousma said his firm’s sweet-spot is $2m-$10m and whilst 2018 and 2019’s sales were sustainable, this past year going into 2021 has “been crazy”. The company has six new-builds right now above 30m (100ft) in construction with new yacht sales making up about half its current year’s business.
But for those who are impatient to get on the water and can’t wait for a new-build, could the secondhand or refit route suit better? “Well yes, but there just isn’t a lot of inventory right now,” said Jousma. “If you’re shopping for a late model 30-35m Italian yacht, like a Sanlorenzo or Ferretti, something about three years old, well there is literally two or three boats in the world on the market right now.”
Across the Atlantic, Richard Lambert, head of sales, Burgess Yachts told SYI after what seemed like a drop-off around April activity has since picked back up. “One thing we have seen is more pressure on inventory, a number of clients have held back in putting their yachts on the market for sale as well as those who decided to take their yacht off the market to ensure that they have a yacht to enjoy with friends and family. Those two factors combined with a pretty strong sales market have put pressure on the number of yachts available.”
That’s actually across the board too, said Lambert. Burgess deals primarily in the 100ft (30m) plus bracket, but when speaking to colleagues in the sub-100ft and even sub-60ft market the message remains consistent.
The answer seems simple, build more yachts. But it can take years for a yard, especially larger ones, to increase production levels and many are already at full tilt. “In some of the larger yards you are actually looking at a delivery build slot of 2025/26. There probably is a little more pressure on yards to build more but it’s not an instant response to market conditions.”
Looking to the rest of the year going into next (we all know how hard it is to predict the future at the best of times), Lambert expects the trend of charterers switching to ownership to continue as long as travel restrictions are in place, which could create a further boost to the sales market. “[But] It’s a little bit like looking into a crystal ball,” said Lambert.
Jousma’s tea leaves read much the same. “If we have had the boom of last year and the boom of the past few months then some of that has to drop off. A lot of people have done what they needed to do if they were going to be boating by summer. So, we are definitely slowing down but part of that is season, not necessarily market.”
That said, Jousma doesn’t think the current boom is sustainable a year to 18 months from now. Whilst he doesn’t think the drop will be damaging to the market, it will have the added effect of bringing inventory back up again.
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