Ciudad de México, São Paulo, Santiago, Lima, Bogotá and Panamá will attract the biggest investments on real estate this year and the years to come. Why?
According to the studies “Latin America Regional Prime Office Report, Year-End 2013”, done by the company of financial and investment services Jones Lang LaSalle (JLL), specialized in offering real estate services and investments management, the independent and different cities of Latin America have a prosperous environment to real estate opportunities, in the big cities, as well as those that have a prosper growth rate.
The experts of JLL have identified six cities that are on the vanguard of economic expansion in Latin America: three “established” cities such as Mexico city, São Paulo and Santiago, and three “emergent” cities, such as Lima, Bogotá and Panamá. According to these experts, these are the Latin American cities considered as propellers of trade and real estate investment.
“The real estates in these cities show a perfect balance between the stability of a big market and the little shopping malls but of a great growth, that make the demand for comercial buildings grow”, said the Director of Regional Operations in Latin America for JLL, Zach Cheney.
Every city has their own expectations and problematics. While on the three biggest markets of office son the región will be massively constructed, São Paulo is going to suffer from problems of oversupply, México can satisfy the existing demand, and the low amount of modern edification in Santiago can be relieved.
Lima, Bogotá and Panamá are also generating high levels of foreign investments on the construction industry even they are a smaller market. These markets intend to achieve a record on foreign investment and economic growth, this situation will create an effect on the commercial activity in all of Latin America in 2014 and beyond, the study reports.
These are the characteristics on why these cities are becoming points of interest for the real estate industry worldwide:
1. Mexico City. The most important market of Latin America, shows the growth rate of employment in the city, and an impressive growth on the Gross Domestic Product (GDP).
Prevision: The businesses that use offices grow at a constant rate. With an unemployment rate of barely 11%, the Mexican capital city will receive 415,000 square meters of brand new offices on 2014, same volume of rented space on 2013.
2. Santiago. The economic optimism is high on the chilean capital city, in where the labour stability is growing. The just finished buildings give space to growth, while the rents have been stable, slightly dropping on absolute terms because of the inflation.
Prevision: It is provided that to the end of 2015, 500,000 square meters of offices are built. This is almost equivalent to the existing 20% volume of offices.
3. São Paulo. With the greatest GDP of the region and the second biggest offices market on 2013, the rapid growth of the demand of offices spaces onSão Paulo has stimulated a strong bet on new spaces, even maybe too much has been done.
Prevision: The conditions of 2013, altogether with the growing inflation and the economic volatility, create opportunities widely attractive for investment on long terms. Over a million square meters of additional space on construction will increase unemployment on the next years and will diminish income securities.
4. Bogotá. The foreign investment on Bogotá was over 17.000 million dollars on 2013, breaking the record of last year. Most of it was destined to oil, mining and hydrocarbons.
Prevision: On 2014 the construction will add less than 180,000 square meters to offer. This is despite the strong demand of office spaces, and 3% of unemployment rate. However, despite of the high unemployment, the expected annual growth of 4.5% promises to generate even more demand for offices.
5. Lima. Named as one of the 20 “Most dynamic cities” of the world on the City Momentum Index 2014 of JLL, Lima dominates the national economic and business scene with over half of the GDP. Normaly it's finished an 80% of the rent of the buildings under construction, before finishing them.
Prevision: Lima has an additional of 200,000 square meters of offices in construction to be delivered on 2016, and is provided that the amount rises a 40% on the next 2 years. The prices and rents of the offices have been rising, but they will settle, and start to drop as soon as the new offices start to appear.
6. Panamá. The growth of the 7.6% of their GDP was the best of Latin America in 2013, and will remain strong due to the expenditure on public infrastructure. However, tax incentives and speculation triggered a flood of construction which added 175,000 square meters last year.
Prevision: The real estate and construction industry strongly bets the impact of the expansion that the Panama Canal will have on the city and on the region. They trust that the Canal will generate a rise of the offices demand, since over 400,000 square meters are in construction until the end of 2016. Despite excessive construction, prospects for sustained economic growth are promising.
"The intense investment in the office market in Panama and infrastructure across the country is a mirror that advances on construction worldwide", Cheney said.
"This is a new chapter of international trade in Latin America beginning with the completion of the Canal and connecting business communities to advance economic progress."