Office Rental: Market Correction

The oversupply of office space and changes in the dynamics and ways of working of companies have led the office rental market to a corrective or adjustment phase, which is mainly evidenced by the downward pressure on rental prices.

Wednesday, March 17, 2021

At the beginning of 2021, CentralAmericaData expected that in the coming years, 4 out of 5 companies will bet on hybrid work modalities, which include face-to-face and remote activities. This phenomenon will force office supply to adjust to the new market conditions.

The report "Latin America Office Market" corresponding to the second half of 2020 and prepared by the consulting firm Newmark, points out that in the capital of Costa Rica at the end of last year, the office inventory was established at 2.34 million square meters of rentable area, 4.2% higher than what was reported in 2019.

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According to Newmark, by 2021 it is expected that the Costa Rican market will maintain a trend of migration towards more modern and efficient properties, a behavior that began to be evident since 2020.

The case of Panama is similar to that of Costa Rica, since in the Panamanian market between 2019 and 2020 the office inventory increased by 1.1%. The report highlights that at the end of last year the availability rate was 30.9%, a situation that confirms the effects of several excesses in the development of speculative supply, considerable delays in the delivery times of new product and the impact of the health crisis and its management by the authorities.

The document specifies that "... the average starting price for the last quarter of 2020 was $16.72/m2, while the closing price was $15.27/m2, after negotiations."

The downward trend is justified by the excess of available supply and the motivation of owners to take available space for several years, explains Newmark's analysis.

Danny Quiros, Market Research Director of Newmark Central America, told that due to the fact that in the Panamanian market there is "... 1.74 million square meters of inventory, of which 30.95% is available, there are important challenges for owners in the design of their commercial strategies."

See "Central America: Potential Real Estate Market"

For Giovanni D'Agostino, president in Mexico and regional director for Latin America of Newmark, "... in 2020 uncertainty prevailed in the world and Latin America was no exception, since in most of the office market there were more vacancies than occupancies. However, the health indicators of the current situation remained stable during the last quarter of the year and, although there is fragility in this balance, there is optimism that once the vaccination stage is overcome and there is greater confidence in the recovery, there could be greater demand for offices."

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Offices: Changes in Market Conditions

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Since office construction is still active and could enter a phase of over-supply, combined with the strong increase in telecommuting, the market could face a contraction in the coming months.

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Panama: High Supply and Demand for Offices

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World Panama Real Estate Marketing

Organization that operates in Panama and Panama.
Phone: (507) 3454542

World Panama real estate marketing promotes city and beach property listings for sale or rent with international syndication to more then 80 real estate web portals worldwide.

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