Oh yes, my friend. It’s that time of year. As we watch the classes of 2022 graduate and the days grow longer, we begin to think about Summer.
One experience I am looking forward to this summer is visiting Puerto Rico with my family.
Growing up, whenever I traveled with my family, my dad would always take the time to talk to locals in the area, ask questions, and just observe.
If we went shopping in the local stores, he would notice how many people were in a particular store, the store’s hours, what merchandise seemed to be popular, etc etc.
What was he doing?
He was bored while my mom and I shopped. Just kidding. Well, I’m kind of kidding.
In all seriousness, my dad was actually observing their local economy.
While most people go to a new place to experience and “feel” the culture, my dad has always used travel to experience and “feel” local economies. He would always leave a place he visited for the first time dissecting its economy based on his observations.
Just like experiencing a new culture for the first time, living in an economy, instead of just reading about it, often fills gaps that economic data cannot explain.
Because I have inherited my economic curiosity from my dad and love industrial commercial real estate, it feels natural to learn about Puerto Rico’s industrial and manufacturing market to enrich my visit later this year.
Let’s dive into some facts about this United States territory
A Few Basics
-Puerto Rico currently has a population of approximately 3 million US citizens.
-The cost of living in Puerto Rico is 4.87% less than the rest of the US, while the cost of housing is 57.03% lower than the rest of the US.
– The GDP of Puerto Rico is $105 Billion annually.
Puerto Rico Has a Strong Bio Science Sector
-The territory manufactures a variety of goods including textiles, processed food, electronics, pharmaceuticals, supplements and vitamins, medical supplies, and more.
– In fact, manufacturing is the largest sector in Puerto Rico, comprising an impressive nearly 50% of the territory’s GDP.
– Puerto Rico has a competitive manufacturing volume on a global scale since it is the 5th largest manufacturing pharmaceutical hub in the world.
– Of course, this means that manufacturing provides a lot of jobs in their local economy. As of October 2021, there were around 79,300 manufacturing jobs in Puerto Rico.
Why would Puerto Rico be an attractive location for manufacturing?
-Talent-The concentration of scientists and engineers in Puerto Rico is currently 6th highest in the world.
Therefore, an adequate amount of Puerto Rico’s workforce retains the skill set to work in the bio science manufacturing sector.
-Labor Force- Correlated with talent, Puerto Rico has faced the same labor shortage issues the rest of the US is currently facing. The difference?
In proportion, Puerto Rico has more available workers than the rest of the US, and manufacturing jobs are not met with a negative attitude. These factors could be used as leverage to increase manufacturing capabilities.
-Tax Incentives- Including reduced capital gains, passive income tax exemptions, and low corporate tax rates.
-Opportunity Zones- Related to the tax benefits, 98% of Puerto Rico is an Opportunity Zone. Opportunity Zones are areas that are considered economically distressed. Investors can defer the capital gain of investment funds if they are invested in opportunity zone properties.
But There Have Been Some Set Backs
-Bankruptcy- Puerto Rico is moving past the bankruptcy filed seven years ago on the $70 Billion in debt it could not repay.
The territory exited bankruptcy earlier this year after a debt restructuring plan was put into place that will have a positive impact on its economy.
-Hurricane Maria- In 2017, Hurricane Maria was the biggest hurricane in Puerto Rico’s modern history.
Puerto Rico is making progress (although still recovering) from this tragedy.
What’s Happening in Puerto Rico’s Industrial Market?
Industrial Market- Mirroring the trends across the United States, Puerto Rico has experienced a rising demand in the industrial real estate market.
Class A industrial rental rates are between $10.78-$15.00 per square foot, and Class B industrial buildings rent for $7.83-$13.27 per square foot.
Supply Chain- Puerto Rico may play a crucial role in the current supply chain crisis.
Economic leaders of the territory see opportunity to contribute to the initiative to re-shore manufacturing by using their high concentration of pharmaceutical working capital to attract new investments to the area.
Puerto Rico is already recognized as a pharmaceutical power house, and it may be time to take advantage of the opportunity for more essential products to be made within the United States.
While there will be plenty of time to enjoy the beautiful scenery through my sunglass lenses and capture some memories through my camera lenses, I look forward to observing the area through a economic lenses.
Some aspects of an economy cannot be captured by data alone.
How to Retire in Puerto Rico: Cost of Living and More – SmartAsset