| An Alternative to Residential Real Estate in Panama |
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| Written by Matt Landau | |
| Friday, March 07 2008 | |
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(Panama City, Panama) Over the last year there's been a lot of speculation
regarding what will happen to the residential real estate market in Panama, and I
think it's fair to say no one really knows for sure. So in this moment of
uncertainty, wouldn't it be nice to have a new and reliable real estate
investment alternative in the capital city? Changes in the economy, population, and cultural makeup of Panama paired with its natural evolution as a city present the following new investment opportunity to foreigners. It's no secret that commercial office space in Panama is at a premium; with the future surely heightening that demand with hoards of incoming foreigners and relocating companies looking to open up shop. Sound familiar? Low supply, high demand? Most investors coming to Panama opt for apartments or other residential options because it's what they know: it's what they're familiar with. They figure, "Oh, I'll just buy flip five or ten condos or pieces of land, then retire with a bedfull of cash. Right?" Wrong. The people who make the most money in Panama don't own units. They own buildings. They are afforded a great lifestyle of passive income, which allows them to do more important things like sit on their yacht and smoke ridiculously long cigars. Commercial real estate is increasing at extraordinary rates throughout the world according to Cushman & Wakefield, and is like a high-roller game of poker in that it requires a high investment to get in, but the rewards are significantly more thrilling. In the search for retail locations, floors of office buildings, or small office structures in Panama, what should you be looking for? First, it makes sense to decide to whom you're interested in renting out your space to as this will directly determine your location. Glitzy, storefront offices, for example, should turn ones attention on the Banking District and satellite neighborhoods (El Cangrejo, Marbella, Obarrio): these are the offices where you'll rent out to guys, as Casey puts it, wearing thousand dollar suits who need a central location, a nice view, and fancy elevator to operate. Prices in these areas for already-built commercial real estate can be anywhere from around $1300/m2 to upwards of $3,000/m2 for the crème de la crème. Pre-construction costs should hover around $1800/m2. You can expect to charge around 1% rental rates and will surely have no problem finding tenants. Now for the juicy bit. Everyone knows residential development in the neighborhoods near Tocumen Airport is semi-stunted for a number of different reasons. But those neighborhoods are also home to the majority of Panama City's bread and butter workforce, the middle class workers who'll be hired to fill said offices. Wouldn't it be nice to have an office that's close to home? We're not talking Rodeo Drive here. We're talking warehouse-type buildings where you can shove large groups of workers for a call center or any other middle-skill enterprise. Casey likens the scenario to San Jose's (CR) Heredia neighborhood outside of downtown which has essentially become worker bee central. You'll have no problem with parking or traffic, real estate is extremely cheap, and renovation costs would be low. For the same reason flipping condos before there was any supply made a lot of people a lot of money, investing in commercial real estate today in Panama City will prove to be of great long-term value. Do keep in mind that while the return on investment will be high, so too can be the risks associated. It's a market people have overlooked (and I think unrightfully so) but the risks seem to be easily offset by financial rewards. image of 'for rent' sign used from www.americanconsumernews.com/2008/01/are-you-covering-more-than-your-rent.html |
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| Last Updated ( Friday, March 07 2008 ) |
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