The first quarter of 2021 brought important changes in Costa Rica’s real estate sector, according to Newmark Central America’s most recent report. In the office market, tenants are able to negotiate better conditions in their leases, in industrial market, supply continues growing and recovering, while the commercial sector is still fighting to overcome the pandemic.
Offices: Tenant Market
The first quarter of 2021 brought important changes in Costa Rica’s real estate sector, according to Newmark Central America’s most recent report. In the office market, tenants are able to negotiate better conditions in their leases, in industrial market, supply continues growing and recovering, while the commercial sector is still fighting to overcome the pandemic.
There is also an interest from companies already installed to move their activity to more efficient spaces with more flexible lease conditions.
“In fact, according to the Real Estate Cycle, this sector is looking much more favorable for existing and prospective tenants to upgrade their leases; a trend that will continue throughout the year due to the current oversupply”
Danny Quiros
Market Research Director of Newmark Central America
As the availability of spaces increase (year-on-year variation of 6.36%) and average prices fall (year-on-year variation of -0.49%), there is a greater activity in the remodeling and adaptation of spaces. The current landscape predicts an increase in availability because the reduction of spaces and the departure of companies whose business was affected by the mobility restriction measures.
New projects still under construction adding a total of 1,158,702 square feet to the inventory of 24.7 million sq. ft. existing in the GMA. Cityzen Belén, Offices Stage 1 (269,098 sq. ft.) is the most ambitious of the current works next to the Ribera Business Hub (279,862 sq. ft.) both located in Heredia City, and others such as San Pedro Business Center (143,655 sq. ft.) in San José City.
An element that is becoming very important is the creation of spaces with improvements. Models such as “turnkey” and its advanced version: “plug & play” are more and more frequent among potential users.
Industrial: Reviving Demand
The industrial real estate market inside the GMA shows slight signs of recovery compared to the last year. This is because the development of logistics use facilities, the continuation of paused projects during 2020 and the arrival of new requirements, particularly from the medical device manufacturing industry.
The year-on-year increase in inventory (0.08%), along with the decreased availability (-2%) and the rise in average rental price (0.56%) demonstrate a significant recovery thanks to the construction of Build To Suit (BTS) projects in the Sectors of Coyol in Alajuela City and La Lima in Cartago City, which were agreed in 2019.
Newmark experts forecast a stable growth of the market in the next three years (it is in the expansion stage of the Real Estate Cycle) and the remodeling of properties in categories B and C. In class A, there has been a significant movement due to the occupation of warehouses.
Currently, there are 1,500,812 sq. ft. of the industrial sector under construction. Among the main projects are the expansions of La Lima Free Trade Zone in Cartago, Coyol Free Trade Zone and the Logistics Center of Cargill Costa Rica, located in Heredia.
“Even there has not been a significant impact of e-commerce, it is expected that this industry will reflect its needs during the second half of 2021,” says Quirós.
Commercial: New Uses for Premises
The commercial sector has been positioned in the recessionary phase of the Real Estate Cycle since the second quarter of 2018, which is characterized by increasing levels of unemployment and a low pressure on rental prices for commercial spaces. Consumer confidence levels and restrictive measures in the Pandemic strengthened the situation.
According to the Newmark report, properties that have just entered the market have experienced a considerable delay in the occupation of their premises. As a result, this year reversions are expected in the use of some of these properties.
There will also be a process of restructuring of tenant mixes consequence of the consumers negative to take out to the streets. Likewise, there will be a process of “natural selection” where only the largest and strongest will be able to recover in the short and medium term.
Despite this scenario, Newmark Central America has registered 307,062 sq. ft. of construction.
Including projects such as:
Metro Plaza Curridabat (35,037 sq. ft.) in San Jose City.
Cityzen (19,612 sq. ft.) in Heredia City.
NG Building (69,825 sq. ft.) in San Jose City.
The main commercial opportunities for these products are related to pharmacies, clinics, e-commerce, convenience stores, and other commercial activities.
