Real Estate & Construction
Beyond the Horizon
According to the Panamanian government, construction is one of the greatest contributors to the country’s GDP, representing some USD8.8 billion in 2016 and employing over 11% of the national labor force. Approximately 178,000 families in Panama generate their income from the construction sector, which accounts for 16% of GDP. By including general contracting work, subcontractor activity, equipment suppliers, construction materials, and real estate developers into that mix, the overall contribution to GDP exceeds 30%. The construction and real estate industry as a whole is currently valued at well over USD11 billion, with construction growing by 8% in the first trimester of 2017.
Despite the enormous amount of existing projects and activity in the market, real estate companies, buyers, and investors face complex bureaucratic processes in Panama. In order to gain approval for residential or commercial construction projects, industry players must not only comply with legal procedures in 19 institutions, but wait up to four years to receive the go-ahead from regulators. Related institutions include the Ministry of Public Works, the Institute of National Aqueducts and Sewers, the Transit Authority, the National Environment Authority, and the Ministry of Health, which all contribute to the development of housing and real estate infrastructure in Panama City and throughout the country. “Within the Ministry of Housing lies the Vice Ministry of Territorial Ordering, where approvals for preliminary projects—be they state projects or private initiatives—are given. From that perspective, the Ministry of Housing plays a key role because this initial process depends a great deal on private developers, which in this case are one of the most important economic engines of the country in employment, investment, and economic activity,” Mario Etchelecu, Minister of Housing, told TBY. For that reason, the Varela administration has placed great importance on the formation of a “single-window” process so that procedures are as efficient as possible.
The ministry’s Solidarity Fund for Housing is being expanded from 74 promoters to over 525 in 2017, with the initial goal of building 25,000 housing solutions in five years increased to 100,000 units. “It will not only give a boost to the economy but will encourage both public investment by the government and private investment to reduce the country’s housing gap,” Minister Etchelecu explained. The government’s investment toward the sector will also grow from USD1.6 billion to more than USD2.1 billion by the end of the year. “We expect to deliver 40,000 completed homes to the beneficiary families by the end of 2017,” he concluded.
While public projects continue on a growth trajectory, the private sector is facing slowdowns that can affect any economy that has undergone rapid growth over a short period. Since the turn of the 21st century, Panama has posted nearly double-digit growth economically, especially within the real estate and construction sector. As the country moves into a new era following the expansion of the Panama Canal, private-sector operators are increasing efforts to bring innovation, sustainability, and diversity to upcoming projects. For investors, projects that push the envelope and take advantage of the country’s natural beauty without compromising the environment are also becoming more attractive.
With the cost of construction still lower than in European, North American, and some Latin American markets, Panama offers favorable ROI to international construction players. Whereas construction in Europe hovers around USD1,500-2,000 per sqm in 2017, Panama boasts a cool USD800 per sqm. Meanwhile, the price of land weighs in at USD300-400 per sqm, although costs vary according to the number of units being built on a given plot
WHERE TO LOOK
Panama’s real estate sector continues to push the limits as it grows. Developers are seeking ways not only to create fresh urban ideas, but also revive rural areas of the country that were formerly overlooked. “Look for growth in Panama City’s suburbs, and interior in general, as well as beach expansion on the Caribbean coast, and new residential developments in the Canal Zone area, specifically in Balboa and Panama Pacifico,” Valeri Dessiatnitchenko, CEO & President of Archimesa, told TBY. Favorable prices and a forecast for stability over time are enticing new developers.
Panama’s real estate developers are looking ahead for trends that would promote sustainability. Jaime de Saint Malo, General Manager of EDIFYCA, has noted that increasing the population density through real estate development is a positive shift for the country. With more people gathering in developed areas, the environment benefits from less carbon emissions, as well as more foot traffic instead of vehicle use. “Proper density allows more people to have a better quality of life that they deserve. If we can offer more people a better quality of life, we will have better economic results that will result in more sustainability for businesses and for the entire community,” Saint Malo said.
The Panama Green Building Council (PGBC) is also working to prevent the “urban sprawl,” replacing it instead with more sustainable city design as well as more efficient housing. The PGBC’s 135 members are also collaborating on a key project to establish baseline consumption statistics so that builders, consumers, and governmental officials can monitor the market’s overall efficiency and consumption statistics. “This will allow companies to more effectively design and market their products and will allow consumers to make informed product decisions,” Roberto Forte Taylor, Director of PGBC, told TBY. Among the over 600 projects underway in Panama, approximately 85 are working to acquire LEED certification. There are already 30 LEED-certified projects in the country, making Panama second only to Costa Rica in Central America in terms of green building initiatives.
The trend toward promoting more population-dense areas is not totally contrived; in fact, of Panamanians living in urban areas, many are now seeking smaller and more affordable apartments. Prompted by transportation difficulties or long commutes from the city limits, Panama’s city-dwellers are gravitating toward city centers, where a 50sqm apartment averages about USD150,000. Lucas Ricardo Zarak Márquez, Marketing and Sales Manager of Grupo Equinox, emphasized in an interview with TBY that “[city centers are] our focus right now, and most of the competition is also starting to attack this type of market.”
Two of the segments that have seen a marked decline in activity are beach resort projects and second homes. Although there is still investor interest in these areas, better infrastructure will be necessary before development can truly take off.
NEXT BIG THING
New design technology and a keen sense of the Panamanian aesthetic are key launching points for the development of high-tech and futuristic innovations in the local real estate and construction sector.
Architectural software firm Archimesa has developed a state-of-the-art 3D rendering technique that allows the designers to completely model and map out real estate space virtually. “Our modeling is a much more interactive experience than rendering. All the new technologies that come out, such as virtual and augmented reality, are natural feeds for us because we need real-time computer generated graphics for those devices,” Dessiatnitchenko told TBY. The company’s long-term goal is to create a product that allows architects to input a design and be able to instantly see a visualization. Such an application would also be interactive, allowing architects, real estate agents, and construction companies to demonstrate their creations to clients and investors. “We want to license the software to other marketing companies that do static renders. The tools they use to produce those static renders are similar to the tools we have to use to make our real-time apps. The learning curve will thus not be that big for those companies if we give them our software, and then they will be able to similar products to their clients,” Dessiatnitchenko concluded.
For projects underway that are well past the design stage, developers are seeking ways to present their creations to an audience that extends past the inhabitants themselves, creating a sense of culture and community. “Our project in Las Tablas is a cultural platform to strengthen the region’s identity, culture, and folklore, inciting local and international tourism to visit Las Tablas and exposing its value first-hand,” EDIFYCA’s Saint Malo emphasized. The artistic and heritage-infused project offers a platform from which EDIFYCA can contribute to the growth of the country by tapping into its authentic aspects.
The revitalization of Calle Uruguay in Panama City is the first urban renovation design competition spearheaded by the public sector since the 1930s. With a key focus on design instead of profitability, the project is set to take off in a myriad of exciting directions. Under the guidance of a feasible budget, architectural firm Forza Creativa is looking forward to the widening of sidewalks, addition of park benches, and ample lighting to create an impetus for commerce and establish the area as a safe neighborhood. “It attracts new residents who want to live in a mixed-use neighborhood and can afford to live in the urban core, right next to a metro station, and can walk to work and live within a five-mile radius with a lifestyle that is urban, young, and metropolitan,” Annamaria Zampogna, Principal at Forza Creativa, told TBY. Within close proximity to public transportation, Zampogna’s partner, Eduardo Quintero, agrees that the project will create spaces for social interaction that will humanize the society. “This will be a catalyst for the private sector, the public sector, and for people to change their behavior and lifestyle,” he said.
Perhaps the most impressive upcoming real estate project is Green Valley, valued at USD30 billion. The project’s aim is to protect and preserve the natural beauty of the country by developing and building residential space that blends into the local surroundings. Located north of Panama City, the project is being developed on the coastline, guaranteeing residents a setting surrounded by breathtaking views and greenery. “We have sold slightly more than USD100 million in land, which translates into 300 land plots for houses. However, the main sales activity has focused on selling housing units within taller buildings, which is much more environmentally friendly,” Carlos Malo de Molina, General Manager of Green Valley, told TBY.
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