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A New Option for Real Estate in Panama

Apr 8, 2008
In such situation, a new and reliable real estate investment alternative becomes quite convenient to adopt. Only an alternative of the existing residential real estate in Panama can secure high rate of return.

Over the last few years, economy of Panama has seen a drastic upward trend. To supplement the high economic pace; population and cultural aspects have changed a lot. These factors altogether played a huge role in securing more investment from the foreigners. Statistics show and predicts that in the coming years, flow of foreign direct investment in the real estate sector will grow even further. The question is where to invest?

It is no secret that commercial office space in Panama is now passing its premium time. The future actually holds an even better situation with hoards of incoming foreigners and relocating companies looking to open up additional shops across Panama. As consequences, price of real estate will go up; as the basic economic theory illustrates: low supply, high demand = higher rate of return.

Most investors coming to Panama are familiar with the residential real estate option. They feel, they will purchase five or ten condos or pieces of land and will lead a life with enough cash when they retire. In todays circumstances, this might not be a right option.

The fact is, people who make the most money in Panama do not own units. They own buildings instead. They can afford a great lifestyle with their passive income. This allows them to relax on their yacht and smoke outrageously long cigars! They can do it because they made an alternative choice in the beginning, unlike most of the investors.

According to Cushman & Wakefield, throughout the world including Panama, commercial real estate is increasing at extraordinary rates. It has become a high-roller game of poker where it requires a high investment to get in, but the rewards are significantly more thrilling.

That leaves us with the questions where to invest and where not to. Is it wise to search for retail locations, floors of office buildings and small office structures?

First of all, one should pre-determine the types of client; she / he would rent the space to. For instance, Glitzy storefront offices should turn ones attention on the Banking District and satellite neighborhoods including El Cangrejo, Marbella and Obarrio. Business executives wearing thousand dollar suits probably will rent the place to be in the central location. Prices in these areas for already-built commercial space can be anywhere from around $1300/m2 to $3,000/m2. Pre-construction sites might cost around $1800/m2. If one charges 1% to 2% rental rates, there will have no problem in finding potential tenants.

For various reasons, residential development in the neighborhoods near Tocumen Airport is now semi-stunted. However, neighborhoods surrounding the area are the homes of majority of Panama City's bread and butter workforce who will be hired to fill up the above mentioned offices.

Now here is the catch:- would not it be nice to have an office that is close to home? The answer is, off course it would. What can we do than?

We can simply re-locate the office premises in the neighborhoods. We are talking about warehouse-type buildings, where a call center or a small size enterprise can be set up with hundreds of people working. There will be no problems with parking or traffic. Additionally, real estate is extremely cheap there and renovation costs are lower compared to the central zone. In the coming years, more people will prefer working in this area and demand will rise which will ensure a higher rate of return compared to residential real estates.

Investing in commercial real estate today in Panama City will prove to be of great long-term value. This alternative investment opportunity has been overlooked so far. Now it is the time to make use of it before it is too late.
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