New airports can be game changers for any town or city, but they are especially important to small countries like Panama. We mentioned the announcement of the new airport at Rio Hato over a year ago in this post. And while new real estate developments in Panama are frequently announced and then delayed for years (if they are started at all), new infrastructure projects seem to get started the minute President Martinelli says “go”. The new airport at Rio Hato has been no exception; it is well beyond the rumor stage and now under construction, with traffic on Panama’s primary InterAmerican highway being diverted around the construction zone.
Regional Transportation Hub
Panama’s Tocumen Airport located in Panama City has been expanded three times in the last 6 or 7 years, and apparently it is still not big enough. Panama’s emergence as a regional transportation hub means that the Tocumen Airport must not only handle increased visitors to Panama, but increased air traffic regionally for flights that use Panama as a stop over point to reach other destinations in Latin America. Panama already receives direct flights from almost every major capital city in Latin America, which includes Mexico, Central America, South America and the Caribbean, as well as several cities in the U.S. and Europe. No other airport in the region offers as many direct flights from so many different cities.
New Airport Location
The new airport at Rio Hato is strategically located right next to one of Panama’s most popular beach resorts – the Royal Decameron Golf and Beach Resort, as well as several other resorts and residential beach developments in the vicinity. This new airport should improve access for tourists looking to spend time on the beach, and put Panama in direct competition with some of the region’s other major beach holiday destinations found in places like Costa Rica, Mexico and the Dominican Republic. The new airport will shave almost two hours driving time each way to the major beach resorts from the current airport location, which, if all you have is one week per year for vacation, can add what feels like two extra days of beach time.
Panama’s Version of Cancun
The amount of new condo towers under construction in the area surrounding the new airport is already mind boggling as Panama’s version of Cancun begins to emerge. Sheraton has recently re-branded one of the newer hotels in the area, becoming the first of what is likely to be many major international hotel chains to the area. Bottom line: this area will explode with growth in the coming years, barring some sort of global economic calamity.
While residential condo sales are somewhat sluggish due to a gun-shy “retail” real estate buyer lacking the easy money financing prevalent in the boom years circa 2004-2007, opportunities abound in commercial real estate and for the new businesses that will feed off this growth. There has already been tens of thousands of square feet of new retail, medical and commercial space finished and leased around Coronado over the past two years. Existing resorts like the Decameron and Playa Blanca are doing extremely well in terms of hotel occupancy, even if their residential units aren’t flying off the shelves.
Nicest Mainland Beaches In Panama
Importantly, the white sand Pacific beaches surrounding the new airport are among the nicest mainland beaches in Panama in terms of sand quality, water clarity, and accessibility. And with Panama City just 60 – 90 minutes away, a synergy will form as visitors to the city visit the beaches and vice versa.
The resulting effects of all of this new construction is the “China-like” growth in the smaller cities in towns surrounding the new airport location. ”China-like” refers to the wave of farmers and peasants now earning higher wages with more stable employment and thus gaining access to credit for the first time in their lives.
In particular, Penonome, which is the capital city of the Province of Cocle, and the closest major town to the new aiport, is feeling the influence since many of the workers who are running the new beach resorts, building the condos, and constructing the new airport come from Penonome. Now under full employment, these families can afford new homes, cars, electronics, and other consumer goods. The rise in demand for these goods results in new residential housing, new hardware stores, new shopping centers, and new restaurants.
A Gold Mine – Literally
All of this projected development along the beaches and around the airport does not take into account the gold mine (literally) that is already under development by Petaquilla Mining. On top of that, a new copper mine is in the early stages of development by Inmet Mining Corp. a Canadian mining company. The gold and copper mines are a few hundred miles from Penonome, but the city remains the only access point by road to the mines from the InterAmerican highway which is the primary artery for traffic in the country.
The gold and copper will be extracted and shipped by sea from the Caribbean side so the unfortunate environmental impacts of the mine will affect the Province of Colon to the north more than the Province of Cocle. Indeed, a competition among businesses for labor has begun whereby skilled labor in Cocle is hard to find and those with skills charge a premium.
Beachfront Property Valuations “Priced In”
Rather than bidding up beachfront property to new speculative highs which has already priced in demand from the likes of the Sheraton, shrewd investors should be scooping up prime property in the neighboring towns and villages near the new aiport like Penonome, La Pintada, Anton, and Rio Hato.
Indeed, shrewd Panamanian investors are doing just that. While the gringo investors become enamored with beachfront, paying top dollar in the hopes that prices will rise further (as they almost always do), Panamanian investors who are selling said beachfront at premium prices are likely buying undervalued commercial land with highway frontage, residential development sites, and other key properties in growing Panamanian neighbhorhoods, where prices are just now beginning to rise from agricultural valuations to residential/commercial valuations as farmers abandon cattle ranching in favor of construction and service jobs.
Not to say there isn’t money to be made with beachfront, but the beaches in this part of Panama have already undergone a major wave of speculation and, as mentioned previously, have “priced in” the value of future cashflows, without discounting the various risks inherent with large scale tourist-oriented developments. Most of the success stories from the ensuing beach tourism boom will be reserved for well connected Panamanian developers and the large international chains who are able to leverage their global brands and align themselves with the right partners. Smaller scale real estate investors should focus on buying lower priced land and existing commercial properties located in the ‘path of progress’.
Regardless of whether all of this growth is perceived to be “good” or “bad”, these are interesting times indeed for Panama.