Contact the Central American Group if you want to establish a manufacturing facility under the Free Zone Regime in Costa Rica.
The Central American Group: Welcome to another episode of the Central American Group’s podcasts. In these recordings, we speak to people that are in Central America to lend us some perspective on what is happening in terms of the economy and the businesses in that part of the world. Today we’ll have a discussion on industrial properties in Costa Rica. We have with us, Jose Ignacio Gonzalez. Jose, please introduce yourself and your company and give us some background.
Jose Ignacio Gonzalez: Thank you, Steve. First of all, thank you very much for the opportunity to be here. It is always a pleasure to share this kind of space with you. To introduce myself, my name is Jose Gonzalez. I am the market intelligence and consulting regional director of Cushion Wakefield Advisory. From our offices in the country, we cover industrial properties in Costa Rica and all of the Central American region. I’m like the person who collects and centralizes the information for all of the region. This specifically covers the region’s most active markets, including Costa Rica. I cover Guatemala, Panama, and recently the Dominican Republic too. But we have a regional scope in our business. My division has two great areas of expertise, specifically the market Intelligence part. We analyze all the data trends and pure research that you can imagine related to industrial properties in Costa Rica and the region. At the same time, the second big part of my job specifically deals with the consulting team. We provide consulting services for a wide variety of clients such as real estate funds, developers, users, banks, and all in that area. I have been in the role for over six years. I have traveled to the different countries in the region, which has given me good visibility of what is happening throughout Central America.
The Central American Group: Okay, but today we’re going to concentrate on some questions that are specifically on Costa Rica, and I’ll start with those. Can you tell us how the market for industrial properties in Costa Rica has developed over the last few decades?
Jose Ignacio Gonzalez: Of course, Costa Rica and the industrial and logistics market have experienced really good performance through the last, maybe specifically, a decade in two big segments or types of business. First, we have the market for industrial properties in Costa Rica, which has been developing hand in hand with foreign direct investment-related companies. These companies worldwide have come to Costa Rica to establish and develop their manufacturing operations in areas such as life sciences, digital technologies, advanced manufacturing, and all that.
The second big part of the market has been the logistics market, which has developed hand in hand with more local and regional companies for all that has to do with warehousing, distribution centers, and all that which has to do with moving merchandise throughout the region. So, these are like the two big branches of the industrial properties in Costa Rica and the country’s logistics market. Both have experienced continuous sophistication of offer and the kind of developments that are built here in Costa Rica. This is total with the continuously sophisticated requirements that companies put on the table. So all these companies, big companies, regional companies, coming here to Costa Rica have put on the table specific and each time more elevated and sophisticated requirements that have led the market to continue to become elevated.
The Central American Group: You mentioned that foreign direct investment has played a role in the development of industrial properties in Costa Rica. Can you expand on that?
Jose Ignacio Gonzalez: Yeah, of course. Costa Rica is a small market. We have a population of 5 million people. So we are very small, even smaller than many states in the United States. So we don’t really have a local market that is very huge. Right. We do, however, have a population and demographics that is highly technical and academically proficient. This has attracted many foreign direct investment-related companies and multinational companies that have seen Costa Rica as a great market to establish themselves and continuously reinvest in four different stages or other manufacturing operations. These companies have seen really good qualities that Costa Rica offers, such as political and economic, cultural affinity with the US, proximity to the US, and lots of direct flights to the main cities in the United States. Costs are lower in Costa Rica are lower than in many US cities. Lots of these issues have positioned Costa Rica as a reference in the world, attracting these kinds of companies and letting the development of industrial real estate properties in Costa Rica that companies require. These things have positioned Costa Rica not only as a reference country in Central America and Latin America but also in the world. We are attracting lots of Fortune 500 companies to the country. As time passes, we are elevating the kind of manufacturing done here in industrial properties in Costa Rica.
Some years ago, we started with low added value operations, and today we do high-value-added operations that each time differentiate Costa Rica from peer competitors in the region. We are in a privileged position to attract these companies continually.
The Central American Group: This is something that I was thinking about, and I’ll throw this question in just because you’re obviously an expert on industrial real estate in Costa Rica. What it cost to lease industrial properties in Costa Rica. What does space in a Class A building generally cost companies?
Jose Ignacio Gonzalez: Excuse me?
The Central American Group: What does a square meter of industrial real estate in a class A building cost in Costa Rica?
Jose Ignacio Gonzalez: Okay, the cost of renting industrial properties in Costa Rica currently stands at between $7 per square meter to $9 per square meter, depending on aspects such as the location and the kind of park you wish to establish operations in.
What is particularly true is that it has been more and more common for companies to establish themselves with build-to-suit solutions. They do this because the requirements of these companies are very specific to their manufacturing facilities. So specifically for the industrial market, Costa Rica hasn’t developed a lot of speculative inventory, but it has built to suit the inventory for the specific requirements of these companies. So the final price is much more referential because it depends on the company’s depth and specific requirements for their facility.
The Central American Group: What are the main opportunities and challenges that the country faces to continue attracting foreign direct investment in high-value-added operations to occupy industrial properties in Costa Rica?
Jose Ignacio Gonzalez: Sure. I would say that one of our main challenges is talent. It’s related to the demographics, even though Costa Rica has positioned itself well for this aspect. As I mentioned, Costa Rica is small. Costa Rica is a small country with a limited population. I would say that the main challenge is that public and private groups, specifically the government authorities, continue to promote the education of the population in the technical and academic areas that companies are currently requiring. Government and educational entities should act so that Costa Rica doesn’t experience in the next year a shortage in talent and continues to attract these companies with cost-efficient operations. The presence of a talented workforce is necessary for this. So I would say that’s number one.
Number two, as a Latin American country, I would say that bureaucracy is in second place. Costa Rica has done a good job in promoting a good business climate in the country, but we have lots of work to do in reducing requirements for companies to open their operations. I would say bureaucracy is number two, and I would say number three is infrastructure.
Also, Costa Rica has been investing at a slow pace in infrastructure regarding vehicle traffic and in infrastructure regarding energy. So we have a lot of work to do in promoting competitive infrastructure for companies to have efficient operations in the country. I would say that those are the three main challenges.
The Central American Group: What typically happens when we post our podcasts to our website and circulate them on social media is that people will come back with questions. We like to refer those with questions to the experts we talk to in our sessions. So if somebody wants to get in touch with you to ask more detailed questions about industrial properties in Costa Rica, how would they go about doing that?
Jose Ignacio Gonzalez: I would say two ways on my mobile phone, no problem. You can give them my phone that’s in my email here, or by email, any of those two ways. I will be glad to answer any questions that people have.
The Central American Group: Well, what we’ll do is we’ll post your email and your cell phone number, if that’s okay with you, in the transcript.
Jose Ignacio Gonzalez: Yeah, no problem.
The Central American Group: Well, I want to thank you for joining us today. It’s been very educational. We wish you good luck and we hope that you have a great rest of the year.
Jose Ignacio Gonzalez: Thank you. Thank you very much, Steven, and looking forward to anything else you need from us. I’m always open.
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