The construction sector’s rapid growth rate (over 30 percent per year) appears to be leveling off while still constituting six percent of the GDP. In the first quarter of 2010, construction permits showed a decrease of 38% compared to 2009. Also the concrete production showed a decrease of 36% compared to the same period last year. By May 2010, the sector started to recuperate its strength as various public and private infrastructures started to develop. The Government of Panama’s (GOP’s) Strategic Plan for the coming five years (2009-2014) is very ambitious. The plan contemplates large infrastructure projects.
There is also an estimated deficit of 140,000 - 150,000 low cost housing units that would retail for $30,000 – $80,000. This will become a very popular sector for construction. Construction will also be fueled in this dollarized economy, with a population of slightly more than 3 million, by projects worth $20 billion through 2015. Besides the Canal expansion, these include several port projects, proposed oil refineries and new pipelines, airport expansion, intermodal systems, the former Howard Air Force Base development, hydroelectric power plants, hotels and resorts and infrastructure projects.
The strong demand for building materials will continue. The following are the main infrastructure and non-residential projects underway or still in the drawing board stage:
• $5.25 billion for the Panama Canal expansion scheduled to be completed in 2014. Excavation work has already begun at the Pacific entrance of the canal. Locks construction is starting in 2011.
• $2.2 billion for on the construction of the first Metro Line for Panama City, scheduled to be completed by 2014.
• $386 million for the construction of 5 public hospitals to be ready by 2014.
• $350 million for the Panama Bay clean up and sanitation network. Begun in 2006, the project will be carried out in three stages with targeted completion in 2015.
• $560 million for a hydroelectric plant in Bocas del Toro.
• $700 million in the former Howard Air Force – Panama Pacifico base business and residential development.
• $75 million in construction of low cost housing project in Curundu.
• $80 million for the reconstruction of the Bridge of the Americas.
• $200 million for construction of a Financial Tower on the old U.S. Embassy site.
• $400 million for a third bridge across the Panama Canal.
• $150 million for a new set of prisons.
In addition, there are a host of other projects such as oil pipelines, airport expansion, new ports, port expansion projects, resorts, shopping malls, etc.
During the last five years, construction has been growing at an annual rate of slightly more than 17%, and the real estate business at more than 7.5%. Although most of the construction is taking place in Panama City, there is also strong building activity across the country in residential, commercial, tourism, hotel and shopping mall projects.
The residential sector continues to show disjointed demand patterns. There is a 5,000 - 6,000 unit excess supply of luxury condos currently on the market, while there is a 140,000 - 150,000 unit deficit for low income housing units. The GOP expects tourism demand to increase in the next several years. The Ministry of Tourism currently reports that there is a tourism growth rate of 5 percent per year. In order to satisfy this demand, they are predicting that an additional 15,000 hotel rooms will be needed in the next ten years. There are currently more than twenty hotels being constructed in Panama, fifteen of which are located in Panama City.