The vacancy rate in Panama City's office market reached 29.8 percent during the first half of the year, the highest for Latin America.
The city's total stock is 697,000 square meters, with 10,000 square meters added during the first six months, according to a new report from Jones Lang LaSalle. During the first half, 34,000 square meters of office space were absorbed and the firm expects another 137,000 absorbed during the second half.
The unbalanced trend will mostly likely continue for Panama City in the years to come. If all projects are completed in time, the city will have added about 582,000 square meters between 2013 and 2015, almost doubling the current stock, JLL reports. The market conditions have consequently become tenant-favorable, causing stagnant or decreasing rents.
The report highlights a similar trend throughout the region. Latin America added almost one million square meters of new construction during the first half of the year, with 700,000 square meters absorbed, leading to a 30 percent increase in available space from last year.
"Many countries are seeing record investment due to strong macroeconomic fundamentals and an expanding middle class," JLL states. "However, 2013 has been met with slowing growth amidst falling commodity prices, a decelerating China, and stagnant export markets in the U.S. and E.U."
The office market in Monterrey, Mexico, posted a vacancy rate of 18.7 percent, coming in second for the region, despite a decrease from 22 percent last year. There were 20,000 square meters of production during the first half with only 9,000 absorbed, JLL says. Adding to the current supply, there are 250,000 square meters in the pipeline expected to be completed by 2015.
Bucking the trend, the office market in Lima, Peru had a vacancy rate of 2.5 percent during the first half, one of the lowest in the world. There were 78,000 square meters added to the market, with 62,000 square meters absorbed during the first six months.
However, the city's vacancy rate is expected to increase similar to the rest of the region despite reaching record levels of office absorption this year.
"The immense production expected through 2015 should outpace demand and push vacancy rates up in the medium-term," JLL reports.
There are more than six million square meters in planned construction through 2015 for the region. The highest office production correlates with the region's fastest growing economies -- Mexico, Brazil, Panama, Colombia, Peru and Chile.