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The Waldorf Astoria, which has long been among the most expensive hotels in New York City, has rooms near Panama City's stretch of night clubs starting at $179 a night. (Photo: Hilton)
The Trump Ocean Club, Latin America's tallest hotel and apartment complex at 70 stories, has become a Panama landmark. (Photo: Trump Ocean Club)
Wednesday, August 28, 2013
Special Reports

Panama Hotel Supply Outstrips Demand 

Hotel supply outpaces demand, while the market for residencies and office buildings are faring better.

BY ERIC SABO

PANAMA CITY --  A record number of tourists in Panama has not been enough to fill the dizzying amount of new hotels being built, which outpace even Brazil as the region's biggest economy gears up for the World Cup and Olympics.

Panama will have the largest hotel growth in Latin America at 39 percent if all 4,700 rooms are completed as planned this year, compared to 10 percent growth for Brazil, according to data compiled by STR Global.

The boom is centered in Panama City and comes on top of the recently opened Trump Ocean Club, Latin America's tallest hotel and apartment complex at 70 stories. The equally massive Hard Rock Hotel, with 1,500 rooms spread over 66 floors, opened late last year after developers switched their plans for constructing luxury condos in the same building. 

While tourist arrivals jumped 5.3 percent for the first half of 2013, hotel occupancy rates in Panama City hovered at 45.4 percent in June, STR found. That was down 10.1 percent from the same month a year before, the steepest drop in the America's.   

"The supply is greater than the demand," says Annette Cardenas, the marketing director for Marriott in Panama and head of the Central American nation's Chamber of Tourism. "It's a bit crazy."

Hotels have lowered prices in response as well known chains continue to expand in Panama, including Starwood Hotels & Resorts and the Hyatt. The Waldorf Astoria, which has long been among the most expensive hotels in New York City, has rooms near Panama City's stretch of night clubs starting at $179 a night.

Newland International Properties Corp., the developer of the Trump Ocean Club, filed for bankruptcy in a New York Court on April 30, citing declining sales from the financial crisis. Luxury services were uninterrupted as Newland and creditors reached an agreement in July for paying off $220 million in debt.   

RESIDENTIAL AND OFFICE REAL ESTATE

The market for residencies and office buildings appear to be faring better. During the last six months of 2012, an average of eleven residential projects were completed and opened in Panama City, with 76 percent of units being rented or bought, according to the CBRE Group in Panama. That was up 2 percent from the previous six months, while the average rental rate rose from $11.35 to $11.65 per square meter a month.

Office vacancy rates declined by 7.5 percent at the end of 2012 and are likely to remain stable as new companies continue to settle in Panama, CBRE predicts.

Still, new buildings seem to sprout up almost daily in the city, with wrecking crews now tearing down older mansions to make room for modern offices and stores. Construction has fueled almost a third of Panama's ten percent economic growth for the past two years, the fastest in Latin America.  

While there are "no signs of bubbles in the real estate market, anecdotal evidence suggests that there may be oversupply in certain segments such as hotels and the high-end real estate market," the International Monetary Fund said in a March report on Panama.  

Kent Davis, a real estate broker at Panama Equity, says that condo and home prices have been holding steady in the city as people grow frustrated with the construction and traffic. In suburbs to the east, where developers are building luxury homes along golf courses, the asking prices are in some cases equivalent to the Trump Ocean Club and they're "getting it," Davis said.

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