The Future of Office Space in Panamá Post COVID-19

Oct 7, 2020 | Panama, David

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One of the hardest-hit commercial real estate segments during the pandemic has been the office segment, both in terms of demand and price. Even before COVID-19, the office segment had already suffered a significant decline in numbers in Panamá, because there was an overwhelming supply of inventory and in terms of the life cycle of the industry, Panamá was observing a market buyer phenomenon, because it had come out of a real estate bubble and pricing was in a correction mode. Add to this COVID-19, where the need for social distancing forced companies to have employees work remotely and one might conclude that the office segment will never recover! But alas, not all is lost.

According to a survey from CBRE done from June 16 to August 7, 2020, in over 32 companies in 18 countries, to 10,000 respondents, 90% of those respondents, which included both employers and employees, stated that productivity remained the same working remotely. Furthermore, 85% of employees would prefer to work remotely 2 to 3 times per week in the future and 60% of respondents said they would return to the office for community and collaboration.

So what does this all mean? The answer is simple: working remotely is here to stay, but so is the office. It will not be the traditional office space as we had been used to before the pandemic; it will be a new kind of hybrid space where employees can go to the office on a need basis to socialize with their peers or employers on specific subjects while maintaining the corporate culture structure that comes from the office surrounding.

But offices will need to have more open spaces than ever before to maintain social distancing requirements, they must have better online technology readily available throughout the entire office for remote meetings that take place and office furniture and design of space will need to be less bulky and more dynamic allowing for collaborators to readily and easily move around the office to form smaller groups to collaborate amongst them. Private meetings in closed rooms will have to be reduced to smaller groups and closed spaces will be less needed than before.

Understanding this will be crucial for the leasing of office space in Panamá. Rental prices will have to be lowered, probably with a reduction of about 20 to 30 % of February 2020 prices, but if office owners can provide these hybrid spaces with more open flooring that allow for more dynamic collaboration and state of the art digital technology, they will be able to procure leasing of their spaces. Lessors will also be able to negotiate better long-term lease agreements with their tenants, which will secure them a yield producing investment for a minimum of two to three years.

But leasing office space in Panamá will have its challenges because, except for the LEED-certified buildings and some specific office spaces in class A and B+ buildings, the majority of the office space in Panamá is very traditional in concept and design with many closed areas, bulky furniture, and basic internet communication. Establishing the correct market price will attract clients, but for office supply to meet demand, owners will need to invest and make internal changes in their office spaces in order to provide the necessities required from tenants.

Those owners who can adapt quickly in this post COVID era and understand the new hybrid concept of office will have an advantage in obtaining clients who are willing to rent during and after the pandemic!

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Michelle Méndez
Real Estate Agent
Lic. PN-4027

Panama Direct +507-6673-7818
Boquete +507-730-96-13
Panama City +507-382-5155
[email protected]

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