Panama: Developers seek to tap Panama’s retail sector, with numerous projects in the pipeline

The ongoing construction of a number of new malls suggests sector stakeholders believe there is significant increase potential in Panama’s retail industry, which posted solid increase figures last year.

Data released in January by the Institute of Statistics and Census (Instituto Nacional de Estadística y Censo, INEC) shows total revenues in the sector reached $7.4bn in the initial three quarters of 2016 – a 6.7% year-on-time(y-o-y) increase. While Panama Province saw retail revenues rise 4.7% y-o-y, much of the boost was driven by the 15.5% increase recorded across the rest of the country.

The sector as well remained a vital employer, providing 83,286 jobs in 2016, compared with 52,820 positions in manufacturing and 42,362 in wholesale trade.

Building on success

As of August 2016, an estimated 538,000 sq metres of malls and commercial centres were under construction in Panama, according to local media, with most of the development taking place in the east of Panama City and areas surrounding it.

The capital is by presently home to 10 malls, with the Panamanian Mall Association (Asociación de Centros Comerciales, ACC) expecting 10 additional malls to be built over the next few years.

Across the country, several companies submitted environmental impact assessments (EIAs) for major commercial developments in 2016. In April, for example, domestic firm Mishbaja submitted an EIA to the Ministry of Environment for the construction of Mall 24 de Diciembre – a project valued at $27m with a total development area of 70,000 sq metres in the town of 24 de Diciembre.

In June London & Regional Panama submitted an EIA for Town Center, a $90m mixed-use real estate development spanning 13 ha. The site will act as the centrepiece for the firm’s master-planned community Panama Pacifico located in Panamá Oeste Province.

Two months later, the consortium PGC Developers issued an EIA for the construction of Panama World City. The $4.2bn multi-purpose development will spread across 570 ha of land in the east of Panama City.

Lastly, domestic construction company Grupo ZS presented an EIA for Penonomé Mall in November. The developer expects the $16.2m shopping centre in Coclé Province to break ground later this year.

Construction indicators down

While these projects have from presently on to commence, they could bring a much-needed boost to the non-residential construction segment on the back of a downturn in activity in 2016.

According to estimates released by the INEC in January, the price of non-residential construction, additions and repairs decreased 8.6% to $752.3m last year. In Panama Province this decline was particularly stark, with the price of construction work falling by 21.8% to $438m.

Overseas demand

Tourist spending continues to play a key role in Panama’s retail sector, accounting for up to 50% of sales in the high-end segment, according to press reports last year.

A small increase in inbound traffic was recorded in 2016, with tourist arrivals rising 1% to 1.7m in the January-October period, according to the INEC. Tourist spending was as well up slightly, from $3.5bn in the initial 10 months of 2015 to $3.7bn in the same period last year. However, these figures did not translate into higher hotel occupancy rates, which fell almost five % points to 47.9% in 2016.

With regional neighbours like Venezuela witnessing an economic slowdown, some market players are concerned that these marginal increase figures will be reversed someday. These worries have been compounded by the Panamanian balboa’s peg with the dollar, as the latter made substantial gains against a lot of of the world’s major currencies last year.

Tapping the tourist market

In the face of these headwinds and in an attempt to further capitalise on Panama’s geographic advantages, the ACC has been working with the Ministry of Tourism to promote Panama as a shopping destination to non-traditional tourist markets in the region, such as those of Trinidad and Tobago and Mexico. The ACC’s efforts have included creating three discount shopping dates during the year, with nine Panamanian malls taking part in the scheme.

The addition of a new terminal at Tocumen International Airport is as well expected to tap retail interest from tourists, with three 700-sq-metre business-free areas to be tendered in the initial quarter of this year. The expansion of the airport is scheduled for completion in 2018 and aims to double the number of inbound visitors by 2022.