Expansion of the Panama Canal boosts the industrial and logistics markets.

 

The $5.3 billion Panama Canal expansion, which will double the canal's capacity, is expected to be completed in 2015. As a result, speculative logistics production has increased as the country's private sector prepares for an expected increase in demand for logistics and warehouse space.

In Panama City and Colon, there are currently five industrial/logistics parks (ILPs) and seven free trade zones (FTZs). According to a year-end study from Jones Lang LaSalle, three more ILPs will be completed in the next two years, adding more than 80,000 square meters of additional rooms.

The extension of the canal would more than triple the TEU capacity by allowing ships nearly three times the size of the biggest ships that currently pass through the canal to pass through.

According to the survey, speculative industrial stock is expected to rise by 40% in the next few years. propertyfinder

The Corredor Sur submarket contains roughly 60% of high-quality industrial stock. In 2014-2015, this submarket will see a significant increase in speculative industrial space demand, with nearly 160,000 square meters added, or roughly 80% of total projected production.

"The primary reason for this is that land near Tocumen International Airport is relatively inexpensive compared to other parts of Panama City, and the road infrastructure is of higher quality, with easy access to Tocumen International Airport," according to JLL.

According to the survey, speculative demand in Panama City is almost entirely concentrated in one of two submarkets: the Reverted Areas (Panama Pacfico) and the Corredor Sur.

"The MIT Logistics Park in Colón is the only speculative ILP park in Colón," according to JLL. "It was built in the early 1990s, and its owners recently announced plans to nearly double its size by 2014."

The majority of the land under construction in Corredor Sur is for build-to-suit projects, which are expected to fill up quickly.

With more than 80,000 square meters of new speculative space added in the last two years, Panama Pacfico has increased its total bid by 60%.

The authors of the JLL report said in the report, "This project has seen very attractive absorption rates in the past." "However, for the time being, the owners have restricted future ambitions to create speculative warehouse space, preferring instead to concentrate on Build-to-Suit projects and master-planned other core office and residential developments."

Non-FTZ lot prices vary from $100 per square meter to $1,200 square meters, while FTZ lot prices range from $100 to $600 per square meter. This is due to the fact that non-FTZ lots are on more expensive land closer to the city center with infrastructure, while FTZ lots are on more undeveloped land.

The cost of quality warehouse space varies from $800 to $1,900 per square meter. In an ILP, rents vary from $6.75 to $9.00 per square meter per month, while in a speculative FTZ, rents average about $8.00 per square meter per month. Rents in the Colón FTZ are usually much smaller, ranging between $2.00 and $4.00 per square meter per month.

Since developers seldom build new space before a dedicated tenant has signed a lease, Class A industrial space in Panama is typically easily absorbed. Absorption is expected to rise in 2014.