CARACAS (Reuters) - Building luxury apartments or corporate office towers might seem like an odd investment in an economy reeling from a deep recession, triple-digit inflation and chronic product shortages.
Unless it's Venezuela.
The combination of soaring prices and exchange controls that prevent businesses from buying dollars has made high-end real estate an attractive way for companies to protect the value of revenue earned in the increasingly worthless bolivar currency.
Cranes clutter the skyline of the Caracas municipality of Chacao, home to the capital's financial district and most of its embassies, despite a backdrop of huge supermarket lines that have become a symbol of the country's economic decay.
Las Mercedes, a neighborhood developed in the 1950s as an exclusive residential zone that is now filled with garish restaurants and bars, is also awash in real estate development.
"These projects all start from the same premise - 'let's absorb bolivars,'" said Beatriz Yilo of CBRE Venezuela, an affiliate of real estate services firm CBRE Group Inc (CBG.N).
"When you have a system that penalizes foreign exchange operations, and you don't want to commit a crime - what else do you have left?"
Total square footage of premium office space in Chacao and Las Mercedes is set to jump by nearly 50 percent by the end of next year, according to figures compiled by CBRE, while the cost in local currency of renting or buying such space has soared by nearly a factor of 15 in the last two years.
That roughly tracks the returns that would have been provided by buying dollars on the black market during the same period - with the added benefit that developers will have valuable assets on the ground if the economy recovers.
The government of President Nicolas Maduro sells dollars at 10 bolivars each for priority goods such as food and medicine and at around 660 bolivars for less important items. But greenbacks fetch nearly 1,100 bolivars on the black market, where the Venezuelan currency has lost 91 percent of its value in the last two years.
Municipal officials say multinational companies with operations in Venezuela, which routinely take write-offs on earnings statements due to depreciation of their bolivar holdings, are key investors in premium office space.
The officials declined to identify specific companies, but said they range from a well-known financial services company to popular consumer products groups.
Foreign companies contacted by Reuters about real estate investments in Venezuela declined to comment.
Many of the projects were drawn up in 2010, when the government toughened exchange controls by outlawing a widely-used parallel currency market, leaving bolivars trapped in local bank accounts.
The luxury real estate development contrasts with the tough day-to-day realities of Venezuelans who spend hours in lines seeking staple goods ranging from rice to medicine.
"This is routine, it's like this every day," said Carlos Martinez, 40, a bank employee standing in a line stretching through the flashy La Castellana neighborhood, a few blocks from where a new mall with office space and luxury apartments is set to open.
"This is a wealthy area with all these luxury buildings and look at the line I'm stuck in."
The overall construction industry, like the rest of the economy, is in crisis. Building middle-income homes is rarely feasible because so little financing is available for construction or for purchase, and middle-class spending power has been battered by inflation.
Production of cement and steel have plummeted since late socialist leader Hugo Chavez put those industries under state control, meaning developers now have to buy such materials on the black market at increasingly high prices.
Real estate experts say that the high-end construction frenzy may have peaked last year as rising prices mean that new square footage is no longer necessarily a bargain.
But municipal authorities overseeing both Chacao and Las Mercedes their say phones continue ringing off the hook with requests for information about construction permits.
"These are people who have a long-term vision, who want to invest because they see the country is going to change," said Chacao Mayor Ramon Muchacho. "But this is also a financial issue: the only shortage we don't have in Venezuela is a shortage of bolivars."
Reporting by Brian Ellsworth; Editing by Kieran Murray