It appears that Panama's real estate bubble has shifted from residential towers to commercial office space and hotels. A trip through the city shows many towers under construction and although a good number of them are residential projects getting closer to completion, there are many that are either hotels or commercial towers. Hotel occupancy in Panama has been on the decline and occupancy rates that were in the 80% plus has now dropped to the med 60% level. On top of this decline is another 10,000 plus hotel rooms coming on line over the next year or so. The Megapolis alone is 1500 rooms and it is one of several dozen hotel projects underway. Then there are the commercial towers which depend on the continued flow of multinational companies coming to Panama to open up shop. Thus far Panama has done well with filling up this commercial space, but just as in the residential and hotel construction, the developers appear to have gone overboard in their estimation of absorption and odds are there will be a lot of overhang in the market within a year or so as these buildings come online. I believe it is reasonable to expect prices of hotel rooms and office space to become highly competitive over the next year especially if the world economy gets the double dip many are expecting.
This article speaks to the HOPE that many have for the continued flow of multinational companies to relocate to Panama.
From La Prensa;
Roberto Gonzalez Jimenez
The skyline of Panama change at top speed. Under the cranes that are on the horizon, few would dare to diagnose that the world has experienced one of the worst economic crisis in history.
Part of this phenomenon can be attributed to the dynamism of tourism and corporate projects. "Faced with declining high-standard housing, the sector was redirected toward the construction of hotels, shopping centers and office buildings.
And for residential housing of a modest profile, "said Jaime Jované, president of the Panamanian Chamber of Construction.
"This movement, together with investment in public works, has allowed the construction industry to remain at acceptable levels," he added.
Some of the stars of the future skyline of the city will be office buildings, with innovative designs such as the Revolution of 50th Street Tower, a 52-story tower that offers high offices of 145 thousand square meters.
Also on 50th Street stands the Financial Tower, with 56 floors will house, among others, the offices of Tower Bank.
Punta Pacifica is building another giant of office tower: the Oceania Business Plaza, a project with two towers, one 56 story's and another of 44.
The corner of Balboa Avenue and Aquilino de la Guardia is a clear example of the shift in construction.
In this batch was planned the Ice Tower, a building of over 100 floors for hotel and residential use.
Declared infeasible, the developer changed the project to one of 63 heights in the same structure combines a five-star hotel and office space of 108 thousand 400 square meters.
In Costa del Este, another sector of the city where corporate activity grows, the market, among others, the Costa del Este Financial Park (45 floors) and the Prime Time Business Tower (20 levels).
All these projects, ranging in price from $ 2500 and just over $ 3,000 per square meter, will be delivered between the end of this year and 2012.
In 2013 there will have to add the offer of the Financial Tower, the skyscraper to be built by the Government in the former headquarters of the U.S. Embassy on Avenida Balboa, which will become the tallest in the city.
The government has planned the sale of 40 thousand square meters of offices to the private sector to finance part of the construction of the tower.
With an offer of that magnitude in the next three years, the question is whether demand will be strong enough to absorb it, or whether, by contrast, have a situation similar to the reality in upscale residential sector, where many apartments remained unsold.
The industry insiders say the level of sales of the projects indicates that the market can absorb the new supply. Bet, moreover, the success of Panama as the headquarters of multinational companies.
"Panama is becoming a business hub with companies setting their base of operations for the region," said Ivan Carlucci, former president of the Panamanian Association of Brokers and Real Estate Developers (Acobir).
Since 2007, through Law 41, Panama offers tax and labor incentives for multinationals to provide services to third countries from Panama.
According to recent reports by the Ministry of Commerce and Industry, about 40 companies have benefited from this law to settle in Panama.
Only in 2010 have received their license as Multinational Companies Headquarters in Panama firms such as SAB Miller Central, Otis, Ericsson, Adidas and Sanofi Aventis, among others.
Not in all cases these companies occupy large office spaces or large staff bring to the country.
Some have done so, as the case of Procter & Gamble's U.S. East Coast.
To Carlucci, who estimated that only a multinational can claim between 3000 500 and 6000 meters squared offices, with the arrival of these companies also streamlines the rental and sale of apartments.
The challenge of Panama and its authorities is to continue the promotion abroad and not worsen the conditions that have made Panama an attractive place for investment.