The rental rates of commercial premises have dropped between 15% and 40%, while the high-end residential property sector has fallen by more than 30%.
The slower pace of economic growth in Panama has slowed down several sectors. Domestic consumption has declined and hotels, different services, car sales, as well as construction areas are suffering from its effect.
Over-supply of commercial spaces
The real estate market is a reflection of what is happening. Several years ago, when sales were booming, the developers received an avalanche of buyers even before the construction broke ground. However, about two years ago that all had to change.
There is an oversupply of close 500,000 square meters and 600,000 square meters in real estate (residential and commercial property accordingly). To consume that kind of volume, the today’s market would require about 7 years, projects CAPAC (Panamanian Chamber of Construction). Panama City is flooded with rental and sales ads of all kinds of properties. The most visible are those in the commercial sector, which has led to lower prices in some cases. Vía España, San Francisco, Punta Pacífica and El Dorado are the areas with the highest offer.
The stagnation in certain sectors of the Panamanian economy, and the consequent outflow of customers has caused many of the tenants of commercial spaces to ask for serious discounts. In many cases, the owners grant the requests in fear of tenants leaving them.
On the plus side, it can diminish the expends for many businesses, as rent always can be a major part of it. That, in turn, will lower the prices and the customers will eventually get a fair price for what they buy.
Let’s take a look at Maria: she is the business owner and a couple of months ago rented a 62 m2 office close to Lefevre park. She paid $1,400 for it plus the maintenance fees, but as the business started to slow down and eventually she had to move out.
A lot of the property owners in this situation agree to provide a discount for the next six months to a year.
Currently, a 50-60 sq.meter commercial space on the Via España is offered at up to $ 1,000 less than what it used a few months ago.
Residential property
It is estimated that 85% of the deals in the residential segment are rentals because young people and precarious workers cannot own anything due to lack of solvency.
So the reality is that investing in rental properties is still a good business, confirm real estate experts. There is a high demand for apartment rentals in the range of $ 800 to $ 1,200 per month. And the closer it is to the metro lines, the better.
However, there are other experts who say that the rental of high-end homes has had a drop in prices due to the oversupply of the market.
The apartments that previously could be rented for $4,000, are now being rented for $2,500, a decrease of $1,500 per month or 38%! The areas of greatest decrease are Punta Pacifica, Balboa Avenue, and Costa del Este.
Also in areas such as El Cangrejo, San Francisco, rents that were previously $2,500 are now on average $1,000 lower the previous level.
Panama no longer has the same foreign inflow as it used to. It is mainly the Panamanians who are buying and renting within themselves: another change in the composition of the market.
