Comparative analysis • Real estate investment

    Office vs retailWhich is better for investing in Panama?

    This Panavanti guide is for anyone with capital for a commercial property in Panama who can't decide between an office and a retail unit. Office vacancy in Panama City peaked near ~45% in 2023, the highest in Latin America that year per JLL, and had recovered to roughly ~24% by mid-2026 per Newmark, still high by regional standards. That recovery, and how uneven it is across building classes, shapes most of what follows. We lay out the numbers so you can pick with your eyes open.

    View commercial properties

    Offices or retail? The short answer

    Offices

    Offices are for experienced, well-capitalized investors who can wait years. The sector peaked at ~45% vacancy in 2023, the highest in Latin America that year, and had eased to roughly ~24% by mid-2026, still high for the region, after years of oversupply and the shift to remote work. You'll need patience for a long lease-up and cash for tenant incentives, and your tenants will be corporations that negotiate hard. Typical yields are 4–6% gross, with upside only if the market keeps recovering.

    Retail spaces

    Retail is easier to enter and steadier for most investors. Typical yields are 6–8% gross, and occupancy holds up when the location is strong. An NNN lease moves expenses onto the tenant, and a leased unit resells faster than an office. The work is in vetting the tenant and walking the block before you buy. It suits investors who want stable cash flow.

    One caveat. Offices carry more risk and more work, with upside only if you buy at a discount. Retail pays a higher yield and keeps its tenants longer, so it wins on immediate cash flow. Which one is 'better' comes down to your capital and how much vacancy you can stomach.

    Office vs retail, row by row

    Aspect
    Offices
    Retail spaces
    Typical investor profileExperienced investors with serious capital who can wait out a vacancy. Most are institutions or high-net-worth buyers with a horizon of several years.Almost any investor, including people who want a steady rental check. The lower entry ticket lets small investors in.
    Capital requirementsHigher. Count on $500,000+ for a Class A unit, plus a reserve for fit-outs and tenant incentives while the market stays soft.Lower. Small units commonly trade at $150,000–$300,000, so the entry point sits well below offices.
    Lease structureMulti-year contracts of 3–5+ years. The landlord runs the common areas and bills the tenant a CAM fee. Right now tenants are getting flexible terms and discounts.Usually triple-net, so the tenant pays maintenance and repairs, sometimes taxes too. Leases run 5-year terms with renewal options and annual escalations of ~3–5%.
    Gross yield (cap rate)~4–6% gross on occupied space in a normal year. A long vacancy drags the effective yield down. The best towers with long leases may reach ~6%.~6–8% gross is typical for a well-located unit. Value-add deals or secondary locations can reach ~8–10%.
    Vacancy and occupancyHigh, though easing. Citywide vacancy peaked near ~45% in 2023 and had recovered to roughly ~24% by mid-2026 per Newmark, still high for the region. Re-leasing a floor can take 6–12+ months. Class A towers in the top zones do better.Usually high when the location is strong. Well-run centers stay ~85–90% occupied, and a vacancy fills faster because everyday retail (supermarkets, pharmacies) always needs space.
    Income stabilityStable while the lease runs. At renewal it gets fragile. If the tenant leaves, income drops to 0%. Market rents have swung –15% to –20% in recent years.Moderately stable. Several tenants and everyday uses cushion the income, and a percentage-rent clause adds upside in good years.
    Demand driversCorporate growth and multinationals expanding into Panama's logistics and financial hub. Demand is cyclical, and remote work has thinned it worldwide.Consumer spending and population growth, plus tourism. People need stores for daily necessities every week, so demand swings less than for offices.
    Liquidity and exitLow in the current market. Buyers are few, most want the property leased before they sign, and marketing runs >1 year. Values are under pressure.Relatively liquid, above all for small units, because the buyer pool is broad. A leased unit in a good area can sell in months.

    The figures come from market analysis and from transactions observed in Panama City. They are indicative and move with the asset and the year.

    What you gain and what you risk with an office in Panama

    Potential advantages

    • •Corporate leases run long. With a solid tenant, cash flow is predictable for 3–5+ years, much like a bond.
    • •There's upside if you buy low. Buy at a discount in the current depressed market and you stand to gain when absorption picks up.
    • •Tenants with strong credit. A multinational or a bank tends to pay what it signed for, and so does a law firm.
    • •The best zones keep their tenants. Class A buildings in Costa del Este or Punta Pacífica run below the ~24% citywide average as of mid-2026.

    Real risks

    • •Vacancy is the big one. It peaked citywide at ~45% in 2023, the highest in Latin America that year, and was still around ~24% in mid-2026. Losing a tenant can mean months or years with no income.
    • •Fit-outs come out of your pocket. In a soft market you attract a tenant with grace periods and a fit-out contribution, and often a rent discount on top.
    • •Rents are still under pressure. Office rents fell 15–20% in recent years, and we expect the recovery to be gradual.
    • •Remote work changed the demand. Many companies now want fewer m² in a better building, so the market is splitting into towers that fill and towers that don't.
    • •Selling takes a long time. An office can take 12–24 months to sell, because there are few buyers in the current market.

    Who should invest in offices today?

    Institutional or specialized investors with serious capital and a 5+ year horizon, ideally with a track record leasing to corporations. You also need to carry an empty floor for months without flinching. If you can buy a Class A asset at a depressed price and wait for the recovery, there could be upside. If you need cash flow next month or a quick exit, this isn't your asset.

    What you gain and what you risk with a retail unit in Panama

    Potential advantages

    • •The yield is higher. 6–8% gross is typical, and a value-add deal can reach 8–10%. An NNN lease lifts the net yield closer to that.
    • •Occupancy holds. Well-run centers stay 85–90% occupied, and a supermarket or a pharmacy keeps paying rent through a bad year.
    • •The lease favors you. Under NNN the tenant pays maintenance and insurance, and sometimes the taxes.
    • •It resells faster. A small unit with a good tenant can sell in 3–6 months, because the buyer pool includes locals and expats as well as small funds.
    • •The entry ticket is lower. Small retail units go for $150,000–$180,000 at the low end, so more investors can get in.

    Real risks

    • •Tenants fail more often. A restaurant or a clothing store closes far more often than a B2B company does.
    • •The location can turn on you. A change in traffic flow or a competitor opening next door can knock the value down.
    • •It needs more of your time. Lease talks get more involved, you coordinate with the plaza's administration, and the facade becomes your problem too.
    • •Fit-outs don't transfer. A restaurant's build-out rarely works for the next tenant, so you adapt the space again.
    • •E-commerce is eating some categories. It's smaller than in developed markets, but it's growing and already hurts certain kinds of stores.

    Who should invest in retail spaces?

    Investors who want steady cash flow and will put in the hours to vet the tenant and walk the block. It fits a 5+ year horizon and a taste for USD yields. A national franchise as tenant (a food chain, a bank, a pharmacy) brings a better credit profile and stays longer. If you want fast appreciation without touching the operation, retail will frustrate you.

    What changes when you buy in Panama

    Zoning and land use

    Panama enforces its zoning. The code on the lot (C-2 urban commercial, C-3 neighborhood commercial, RM mixed) says what can operate there. A retail unit in a purely residential zone can't open legally until the zoning changes, and that process is long and can fail. Newer developments usually carry mixed zoning, with retail on the ground floor and offices or housing above.

    Check the zoning before you sign. Don't assume you can put a restaurant in an office tower lobby. The building has to be zoned for it.

    Panama City and the submarket effect

    Panama is a centralized country. Panama City holds almost all of the country's better office stock and high-end retail, and within the city the submarket decides how a property performs:

    • •Costa del Este is the newer business district. Corporate headquarters land here and vacancy runs below the city average.
    • •Obarrio/Calle 50 is the traditional office zone, and the traffic there puts some tenants off.
    • •Punta Pacífica has high-end towers next to the banks' head offices. The quality is high, and so is the competition for tenants.
    • •Casco Viejo works well for retail and restaurants aimed at tourists, and poorly for corporate offices.

    For retail, keep an eye on the Metro. Lines 2 and 3 are creating new pockets of commercial activity around their stations, and buying near one before the demand shows up is one way to get ahead.

    How tenants behave

    • •In offices, a corporate tenant expects the building to work, with reliable A/C and fast internet, plus a backup generator and secure parking. Buildings that skip upgrades lose tenants to Class A towers, the 'flight to quality' you'll hear brokers talk about. In the current market tenants push hard on grace periods and shorter terms.
    • •In retail, a local business owner cares about location and foot traffic before anything else, and wants a space that is ready to open with the basic infrastructure in place. An international franchise brings a long list of corporate requirements and pays on time. Every business in Panama needs an 'Operating Notice' (Aviso de Operación), so check that the unit can meet the requirements for the tenant's line of business.

    Legal and tax environment

    • Panama runs on the US dollar, so a foreign investor carries no currency risk and every transaction closes in USD.
    • Property tax is low, and many new buildings carry a 5–15 year exemption on improvements.
    • Selling costs you a 2% transfer tax and a 5% capital gains withholding, and commercial property gets no capital gains exemption.
    • The law leans toward the commercial landlord. You and the tenant agree the terms freely, and a commercial eviction moves faster than a residential one.

    Which is right for your investor profile?

    An office may be for you if...

    • You have $500K+ to put in and can carry an empty floor for months
    • Your horizon is 7–10+ years and you don't need to get out fast
    • You've leased to corporations before, or your advisors have
    • You believe the market will recover and can buy a depressed asset at a discount
    • You want to diversify a portfolio that already holds retail

    A retail unit may be for you if...

    • Steady cash flow matters more to you than a speculative gain
    • You want a 6–8%+ yield in USD without big swings
    • You have time to walk the block and vet the tenant
    • Your starting capital is closer to $150K–$300K
    • Being able to sell within months, if you have to, matters to you

    Neither is for you if...

    • You need a return that is locked in (no property can give you that)
    • A single empty month, or a dip in income, would sink you
    • You won't do proper due diligence (title, tenant, lease, physical condition)
    • You have to sell by a fixed date, no matter what

    Frequently asked questions

    Because the city built too much and then companies shrank their footprint. Office vacancy in Panama City reached about 45% by mid-2023, per JLL the highest in Latin America that year, after new space came online between 2018-2023 and hybrid work took hold after the pandemic. The recovery has been real: a Newmark market report puts availability at roughly 24% by mid-2026, concentrated in Class A and A+ buildings in Costa del Este and Punta Pacífica, with older Class B stock recovering more slowly.

    Less than in developed markets, so far. Panama's e-commerce was worth ~$1.7 billion in 2023, a small base that has grown alongside physical retail instead of eating it. Panamanians still go to the mall for the air conditioning and the company. Supermarkets, pharmacies and service businesses keep their occupancy high. Buy retail that sells an experience or a daily need, and skip the categories that move online easily.

    On gross yield, retail wins, at 6–8% against 4–6% for offices. An office can beat that only if you buy at a discount in the current depressed market and the market then recovers. What you net depends on the submarket and on the tenant you sign. Lease terms and expected vacancy move it too. An NNN retail lease pushes most expenses onto the tenant, so the net yield lands closer to the gross.

    Rarely, and never cheaply. Zoning can bar residential use in a commercial building unless you go through a long rezoning process. The floor plate works against you too. An office has no kitchens and too few bathrooms, and its windows don't suit bedrooms, so the conversion costs real money. Running an office as an Airbnb may break the building's rules or the zoning. Buy the property for the use it's zoned for, and don't count on a conversion as your fallback.

    A leased retail unit in a good spot sells in 3–6 months at a fair cap rate. An office, above all an empty one, can sit 12–24 months or longer unless you cut the price hard. Office liquidity should improve when vacancy drops, but nobody can tell you when that happens.

    Triple-net (NNN), the structure most retail leases already use. The tenant pays maintenance and insurance, and sometimes the property tax, so the landlord's operating costs shrink. Office leases usually charge base rent plus a maintenance fee (CAM), but the landlord takes on more, like fit-outs and amenities. Right now office landlords are giving very flexible terms just to fill space.

    Because two addresses on the same street can perform completely differently. An office building in the Financial Area or Costa del Este draws far more tenant interest than one on the periphery. A corner retail unit with parking outperforms one 200 meters further in. Traffic in Panama City is bad enough that people don't detour, so convenience decides. The worst vacancies sit in the weaker locations and the older buildings.

    Six things, in this order: (1) the title and any liens at the Public Registry, (2) the physical condition and the CAPEX it needs, (3) the current lease and whether the tenant can pay, (4) the zoning and permitted land use, (5) the building's occupancy history, and (6) actual operating expenses against the projected ones. For retail, go stand outside and count the foot traffic yourself. Have a local attorney read the lease and explain the tax side.

    No. A long lease gives you cash flow visibility for its term and nothing more. The tenant can default if the business fails, trigger an early termination clause, or simply walk at renewal. The bigger risk is what the unit is worth when the lease ends. If market rents fell in the meantime, you renew lower or you sit empty. Look at the tenant's balance sheet and at where the market is heading past expiration.

    Lightly while you hold, more when you sell. Property tax in Panama is low, and many new buildings carry a 5–15 year exemption on improvements. On sale you pay a 2% transfer tax and a 5% capital gains withholding, and commercial property gets no capital gains exemption the way a primary residence does. Some buyers hold through a company to lower the transfer costs. Run the structure past a Panamanian tax advisor before you sign.

    About these figures

    • The figures come from the sources each guide cites and from Panavanti's own listings and deals in Panama.
    • Ranges are indicative. The same asset class changes between neighborhoods and between years.
    • This is information. Before you decide, talk to a lawyer and an accountant in Panama.

    Want to see specific options in Panama?

    Tell us your budget and your horizon and we'll show you what is on the market that fits, with the numbers behind each option. Nobody here will promise you a return.

    Schedule a callWhatsApp

    Related guides

    All 20 guides

    Want to see what is for sale?

    If you are weighing an investment, look at the active listings in Panama, read how the buying process works, or message us on WhatsApp.

    View propertiesBuying process