As a self-admitted real estate research geek, I thoroughly enjoy figuring out what makes different markets tick. What fundamentals drive development in different destinations? How do land use policies and planning impact siting, density, and design? Which types of buyers are active? Why are certain projects successful while others never make it past the drawing board? And finally, how can places grow in a manner that not only makes economic sense but also preserves their character and benefits both the local community and the environment?
As nerdy as it sounds, these questions really do go through my mind when I travel, most recently through a number of Central American locales. They can’t be answered by simply Googling target markets and real estate conditions – internet research won’t get you far in these still relatively obscure markets; a deeper understanding of place is required. So I wander streets, trails and shorelines, check out local amenities, and meet with residents willing to share their expertise and viewpoints. This is why I love travel. This is also why I love my work.
What struck me most about Central America was the rapid growth that has occurred over a relatively short period of time, i.e., the last decade. Despite the dampening effects of the recent global recession, this region is clearly on the radar of vacation and retirement homebuyers. Faced with rising costs and leaner financial portfolios at home, they are increasingly looking for international investment opportunities and Central America offers appealing proximity to North America, fast-improving infrastructure, reasonably-priced healthcare, and perhaps most importantly, inexpensive real estate.
Costa Rica and more recently, Panama, are typically thought of as prime targets for homebuyers but this trend is spreading to other markets. I saw clear evidence in large-scale developments planned and underway everywhere from Honduras’ Bay Islands and north coast, to the Pacific coast of Nicaragua, Costa Rica’s Guanacaste region, and Bocas del Toro in Panama. I also saw an enormous disparity in community and project planning, impacts, and performance.
Two of my favorite cities – Antigua, Guatemala and Copan Ruinas, Honduras – also happen to be two of the most well-planned communities I had the pleasure of visiting. These places have done a fantastic job of retaining the integrity of their built heritage; adaptive re-use of historical sites is subject to strict design guidelines, and local awareness and conservation efforts are significant. As a result, Antigua and Copan have become outstanding examples of cultural value and highly successful tourism destinations precisely because they offer a desirable authenticity free from neon, billboards, and other visual eyesores.
The best resort projects I visited also shared a common thread, notably thoughtful planning, local community involvement, and a genuine sense of place. One such example is the Pellas Group’s Guacalito de la Isla project in southern Nicaragua where development has not only resulted in much-needed jobs, but also focused on conservation, community benefits, and local pride. Other developers had similar stories and a strong, collective belief that efforts to adhere to environmental guidelines plus highlight unique native attributes and experiences were key to generating buyer interest.
That said, the prevalence of “greenwashing” was just one of the real estate-related pitfalls I encountered in Central America. Unchecked tourism growth can lead to large degrees of economic disparity as well as subsequent security and crime issues. Foreign ownership can drive up pricing and displace locals. Environmental guidelines can often be avoided with a few greased palms. And finally, overzealous development can result in inappropriate schemes and siting plans that inevitably destroy the original appeal of a destination.
Throughout Central America, there are positive signs of a return to growth, with prices firming up and existing inventory shrinking. Nonetheless, market dynamics have fundamentally shifted. The days of speculative flipping appear to be over – at least for now – and buyer motivation is weighted toward lifestyle vs. investment. Also, as previously noted, preferences are starting to favor new resort models, specifically more unique, experiential and integrated product vs. traditional, exclusive, and/or generically-branded enclaves. It’s encouraging to see more educated, sustainability-focused buyers and an increasing awareness amongst both private and public sector players of the need to preserve local resources.
Purchase and development criteria remain firmly rooted in location, affordability, access, and amenities; however, there is now an emphasis on smaller footprints, less conspicuous consumption, and buyers’ desire for authenticity and connection. For every project; however, the need for an extra layer (or two or three) of due diligence cannot be overstated. Successful developers understand not only the characteristics and depth of their target markets but also the local environment they’re operating in. As proven many times over, if you build it, they will not necessarily come and in today’s environment, you probably won’t even get that far, at least if you require any degree of financing. Homebuyers are doing their homework, too, with respect to developer reputations and track records, with a view to safeguarding their investments.
I’ll be returning to Central America in the not-too-distant future and look forward to more travel in this region and others. I feel fortunate that I get to combine these experiences with research and education intended to make for successful real estate projects and dynamic, unique destinations that people will continue to enjoy for generations to come.
About the author:
Kimberley has an extensive background providing strategic real estate planning services to a wide range of clients, including developers, landowners, investors, corporations, public sector entities, and non-profits. Her ability to accurately evaluate real estate opportunities is founded in a unique combination of market research expertise, an innate understanding of market dynamics and, of course, a love of travel.