San José, Costa Rica, since 1956

Strong growth in office, industrial real estate

According to preliminary numbers from the Central Bank of Costa Rica, foreign direct investment (FDI) reached $1.45 billion during 2010, beating the bank’s forecast by $150 million and the 2009 figure by $100 million. Of this total figure, close to $800 million came from free trade zones, and this has had a big impact on the office and industrial real estate markets.

In the past decade, Costa Rica has been very successful in attracting FDI, with an average annual growth of 20 percent. This has had a positive effect on the local economy, with a direct relation to real gross domestic product growth, job creation and reduction of high current account deficits, allowing the country to accumulate international reserves and become less vulnerable to external economic shocks.

In addition, FDI has generated other benefits to the economy, such as the transfer of technological, managerial and financial know-how, among others. The combination of these benefits has given the country a more competitive position on a global level and has generated a positive chain effect that has attracted more companies to invest in Costa Rica. Figures from the Costa Rican Investment Promotion Agency (CINDE) reveal that the number of companies in the service, advanced manufacturing and medical device manufacturing sectors grew from 40 in 2000 to more than 180 in 2010. Moreover, the number of employees belonging to these companies has grown from fewer than 10,000 in 2000 to more than 50,000 in 2010.

When we analyze the behavior of the construction sector, we observe a 7 percent reduction, representing 20 straight months of negative growth. However, the office and industrial real estate markets showed strong growth levels during this same period. In 2009 and 2010, office inventory grew by 10 percent and 9 percent respectively, representing more than 140,000 square meters in new inventory. In the industrial market, growth rates were 6 percent and 12 percent for 2009 and 2010, representing more than 230,000 square meters in new inventory.

FDI: Detonator of Growth

While local and global economies have presented a strong deterioration in principal economic fundamentals during the past two years, local office and industrial real estate markets have displayed positive behavior. The strong growth in supply has been met by strong absorption levels. (See Figure 1.)

In the industrial market, for example, during the first quarter of 2010 the absorption was above 80,000 square meters, while the manufacturing component of FDI reached $315 million. Medical device manufacturing has been the main generator of this demand. This is a sector in which the country is well positioned with a competitive structure, and an accelerated growth is expected during the next few years, creating a need to increase the industrial supply. (See Figure 2.)

When we analyze the office market and compare it to the service component of FDI, we observe the same relationship. In 2009 and 2010, annual gross absorption was of 96,000 and 100,000 square meters respectively, while the service component of FDI reached $66 million and $64 million respectively. This was mainly generated by multinational firms already established in Costa Rica, which, given their positive results and need to further cut costs, decided to bring new operations into the country, hire more employees and thus expand their real estate facilities. (See Figure 3.)

Pillars of FDI


During the past two years, while economic and construction-sector growth has been sluggish, the office and industrial real estate markets have remained fundamentally strong with positive indicators, driven mainly by FDI. At present, Costa Rica faces tough challenges in keeping its competitive structure to attract multinational companies. According to the World Economic Forum, an inefficient and bureaucratic government, lack of infrastructure and increasing insecurity are factors that have a negative impact on Costa Rica’s competitiveness. On the other hand, factors such as health, education, institutionalism, business sophistication, innovation and political stability are the most positive factors. All of these determining factors are analyzed in detail before a company decides to invest in a country. To this we can add the importance of having an adequate supply of real estate facilities that comply with international standards at competitive cost levels.

Aris Stamatiadis is managing director of the Central American operation of Colliers International, a leading global real estate services organization ( 

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