San Juan metro area lures in more businesses as economy rebounds
Although Puerto Rico businesses have always competed for spots in the metro area, the trend is accelerating.
While more Puerto Rico residents move outside the San Juan metro area seeking affordable properties, the metro area continues to attract businesses at an accelerated rate, according to U.S. Census data from the agency’s new interactive tool and local sources.
In 2022 (year of the most recent data), Puerto Rico had 48,965 business establishments, of which 22,612 were in the metro area, up from 21,983 in 2021.
More than half, 12,083, of the establishments in the metro area were located in the San Juan municipality (up from 11,650 in 2021); 3,107 were in Bayamón (versus 3,041 a year earlier); 2,453 in Caguas (a slight increase from 2,443); 2,382 in Guaynabo (up from 2,267 in 2021); 1,997 in Carolina (no change); and 590 in Trujillo Alto (compared with 585 a year ago).
Outside the metro area, Ponce led in 2022 with 2,421 business establishments, followed by Mayagüez (1,602), Arecibo (1,115) and Aguadilla (962).
An accelerating trend
Although Puerto Rico businesses have always competed for spots in the metro area, the trend is accelerating, Carlos Izquierdo-Fortuño, senior analyst for lease administration and leasing at Kimco Realty, told News is my Business.
“Businesses keep seeking to establish themselves in the San Juan metro area because that’s where acquisition power and population density are the highest. People may be moving outside the area because of skyrocketing residential property prices, but their lives, their jobs continue to be here. The economic activity is here,” he said.
Despite the risks involved, new commercial businesses open and older ones relocate to the more competitive and costly metro area to take advantage of this economic activity.
“Outside San Juan, economic activity varies a lot, significantly more. Low seasons are very low. Dead days are very dead. So, San Juan is a better bet for them,” he said.
Another factor fueling this trend is the growth of entrepreneurship in Puerto Rico.
“I think people are less afraid of starting their own business. They see that economic activity is back to or almost back to normal, and they can see themselves making a living by being their own boss,” he said.
Izquierdo expects that 2023 and 2024 data, when available, will show greater growth.
“For example, sales in shopping centers are strong, and I don’t see any indication of that slowing down. I would expect to see an improvement from 2022 to now,” he said.
Ryan G. Christiansen, president of Christiansen Commercial Real Estate, also credited increased economic activity for the accelerated trend.
“What we’re seeing is an economy that is expanding after 15 years in recession. Many market participants had been on the sidelines, not very active, but now that there’s more money flowing into the economy, there’s more demand, more activity, and more opportunities for new and existing businesses,” Christiansen told News is my Business.
“With access to funds from federal programs and to capital and financing from banks, more businesses can expand or relocate to a superior market,” he added.
Renovations, remodelings and relocations
The crowded San Juan metro area is the perennial business recycler. Lack of space and the challenges of new construction create a need for continuing to upgrade, refresh and repurpose old buildings.
Starting from the ground up is rarely an option. It is much more challenging, costly and time-consuming to obtain permits for new construction, Izquierdo said.
“You may want to build something new, but then it turns out that that zone is no longer open for new construction. So, you have to upgrade what’s already there,” he said.
Christiansen, too, stressed the difficulties of new construction in Puerto Rico.
“It’s not easy to build here. Permit and building laws in Puerto Rico are very strict. The construction we’re seeing is in designated areas for a specific use. It’s almost impossible to change the zoning for new construction,” he said.
“That’s why many properties are being updated, remodeled or converted for new uses. Maybe the previous use for that property is now obsolete. It’s much more feasible to convert or modify a property than to build from scratch,” Christiansen added.
Because of the lack of available commercial properties in the metro area, businesses are finding new opportunities in sectors that are not well developed, such as Río Piedras and Santurce.
“These places were good locations in the 1960s, ’70s and ’80s before they were abandoned, and now new businesses can grab them for a share in the metro market,” Izquierdo said.
“Río Piedras is experiencing a new commercial wave in which not only foreign investors, but also local businesses are setting up shop there, and you see activity like a farmers’ market in the market square,” he said.
Activity is increasing in places immediately adjacent to historically popular areas, Izquierdo continued.
“Bayamón is experiencing increased commercial activity because Guaynabo is full, so shopping centers, food retailers and other commercial businesses are moving to Bayamón in order to continue growing,” he said, noting that, as a result, the area of Bayamón that borders wealthy urbanizations in Guaynabo, such as Torrimar, is known as Guayabón.
Industries
The U.S. Census data tool shows that in 2022 the retail industry accounted for 9,971 business establishments in Puerto Rico (up from 9,558 in 2021), followed by health care and social assistance at 8,062 (versus 7,708 in 2021), and professional, scientific and technical services with 5,730 (up from 5,358 in 2021).
In the city of San Juan, most establishments, 2,596, fell within the professional, scientific and technical services category in 2022 compared with 2,410 in 2021, followed by retail with 1,637 (versus 1,614 in 2021), and health care and social assistance with 1,618 (up from 1,570 in 2021).
Izquierdo attributes most of the growth in the metro area to the restaurant business.
“It’s growing a lot, almost too much. Fast-food and chain restaurants are everywhere. There’s barely any room left for another restaurant or fast-food place there,” he said.
“Most of these businesses seem to be doing OK, but I think it’s reaching the breaking point. It’s very saturated, so, obviously, some of the businesses won’t make it,” he added.
In the industrial sector of commercial real estate, companies are moving close to the airport in Carolina or close to the port in Cataño, Christiansen said, pointing to significant growth in the distribution and warehousing business.
In the office sector, the movement and expansion has been in Santurce and Miramar, areas where there’s a lot of economic activity and where employees are seeking quality of life, he said.
“They want to leave the office and walk to a café, movies or grocery store just down the street. So, there’s a movement out of the big office parks in Guaynabo and Hato Rey and into these urban areas,” Christiansen said.
The new U.S. Census interactive County Business Patterns (CBP) data tool shows where most business activity occurs in the U.S. and territories. The data are classified using the North American Industry Classification System. The statistics available include sector-by-sector number of establishments, number of employees, first-quarter payroll and annual payroll.
For example, the data tool shows that the cities with highest employment on the island were San Juan (200,015), Guaynabo (43,142), Bayamón (41,047), Carolina (39,228), Ponce (38,592) and Caguas (37,463). San Juan had the largest annual payroll at $7.7 billion.
