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This is how the real estate market will move in Latin America


Latin America. For this 2023, an improvement in the indicators of the real estate market in the region is expected, mainly in the offices where the hybrid and plug and play model will continue to be a trend, so there will be greater stability in rental prices, downward availability and a positive net absorption. In the case of industry, the indicators will continue with a healthy inertia with a positive evolution projection.

This is clear from the 2023 Outlook analysis of the real estate market, prepared by Newmark Latin America, which highlights that countries such as Argentina, Colombia, Brazil, Costa Rica, Colombia, Chile, Peru, Panama and Mexico will continue with strong activity in the industrial market.

Below are the 2023 outlook by country:
Real estate market
For this 2023, an improvement in the indicators of the office market is expected, thanks to the stability in rental prices, availability with a downward trend and a positive net absorption, which still remains below the historical average, but is favored by tenants looking for transactions type fly to quality. In Buenos Aires, there will be a deconcentration of production and occupation of offices from CBD zones to the north of the city.

In the case of industry, the indicators bring a healthy inertia with a positive evolution projection, with downward availability and stable rental prices. Definitely, the exponential growth of e-commerce has been positively strengthening demand. Therefore, a context of shortage of supply is expected due to the low production of new warehouses and the high market demand.

The main project under development is the Innovation Park, which aims to position itself as an urban center that promotes science and technology, generation, attraction, development of innovation and knowledge of Buenos Aires. It also seeks to promote academic activities of teaching, research, entrepreneurship and creativity that result in the generation of knowledge, the development of new ideas, the creation of companies and employment with an economic, social and cultural impact for the city.

Economic Outlook for investment
In an investment environment focused on local players, record transactions in real estate are expected, as a result of the inflationary rate and absence of financial vehicles to protect savings of companies and individuals. Laboratories, BPOs, software development and mass consumption (food, cleaning and personal hygiene) are the economic sectors with growth prospects. In addition, it is worth noting that Argentina has 8 unicorns with regional or global presence.

Real estate market
The end of 2022 is characterized in the office sector for a fairly active period and with the lowest volume of vacancies not seen in the last 2 years. This renewed confidence, driven by the recovery in economic activity, contributes to expecting a consistent recovery of the real estate market by 2023. However, it cannot be ignored that the decisions of the new government could affect business decisions and slow down the expected dynamics.

Despite a reduction in online sales in early 2022, the industrial market remains very dynamic and drives the sector's expectations for the coming months. In Sao Paulo, for example, despite the significant volume of new inventory – close to a total of 2 million square meters – the risk of oversupply is low.

Economic Outlook for investment
2023 tends to be better than 2022. There is an expectation for the gradual reduction of interest rates given that inflation seems to stabilize. This could facilitate the raising of capital by real estate investors, especially Real Estate Investment Funds (similar to REITs in the US or FIBRAs in Mexico).

The recovery of the office market, especially in Sao Paulo, is definitely expected to attract investments from developers. Meanwhile, such a busy industrial and logistics market is seen as remaining the focus of investors.

Real estate market
It is expected that by 2023, the industrial market will continue with a low availability rate, due to a low supply of new inventory and a high demand for spaces by logistics customers. Industrial developers are focusing mostly on BTS, very little speculation with the precaution of handling high construction costs. In addition, the free zones are waiting for the tax reform of the year 2023. This considers the request to companies that are within the free regime, which comply with the minimum annual export percentage of all their production; If they do not comply with this premise, they would lose the tax and tariff benefits they currently have.

On the office side, it is estimated to continue showing signs of recovery and price increases due to the low availability of representative areas in buildings A and A+. Faced with the decrease in built areas and little future inventory in top buildings, a reactivation of requirements of areas of all sizes is expected, but especially between 300 and 6 thousand m2. An increase in the availability of office space for sale will also be observed.

Economic Outlook for investment
The investment funds, seeing the dynamism in the warehouses of Class A industrial parks, are looking to develop BTS with contracts with a minimum duration of 8 to 10 years and older, with the purpose of having a stabilized income and profit in the future.

- Publicidad -

On the other hand, funds are being very cautious to start new office projects. Most of the new inventory to be developed is part of previous projects, on which second and third stages are being executed. Real estate investments are one of the few that have been resilient to the inflationary impact, so they are positioned as one of the safest markets for their long-term profitability, diversification to minimize risk and the forecast of the increase in rental income or leases due to inflation.

In 2023, the government, construction, infrastructure, logistics, entertainment and hotel and tourism sectors will maintain momentum on the growth of the economy. By contrast, the manufacturing, mining and utilities sectors will moderate their activity. The construction sector will have a good growth rate that will be guided by the performance of civil works and with a lower participation of housing construction.

Costa Rica
Real estate market
In the corporate sector of this country, a slow reactivation of demand and downward pressure on rental prices are expected. At the same time, two short-term trends are identified: the consolidation of the plug and play model and the adaptation of workspaces to the new trends and needs of the current office. On the industrial side, the new demand for the development of the life science industry and the consolidation of the build to suit (BTS) model stand out. Consequently, the first projects outside the Greater Metropolitan Area (GAM) and a high migration towards more efficient industrial buildings that are available are observed.

Economic Outlook for investment
The educational system and political and economic stability are two differentiating factors in Costa Rica. To this we must add its strategic location and the Free Zones Law, which make it a very attractive destination for investment. Specifically in the real estate field, investment fund management companies are carrying out operations to improve the conditions of the properties in their portfolio, taking advantage of the fact that they have suffered high levels of unemployment. In addition, the largest investment comes from abroad, particularly in the luxury hotel and residential sector on the country's North and Central Pacific coasts. Sectors such as tourism, contact centers or medical device manufacturing are expected to continue their interesting growth dynamics for this 2023.

Real estate market
For the office market, companies are expected to continue their return to corporate spaces. This should reduce availability, which stands at around 12% at the end of 2022. The demand, meanwhile, will be located mainly in ranges of 400 to 800 m2.

The industrial sector will continue with little availability for companies looking for large surfaces. However, the high demand seen in the last 18 months will tend to stabilize at pre-pandemic levels. A positive effect of these demand volumes is the driving development of a better standard product than the one used to be found in the local market.

Economic Outlook for investment
A great strength of the Chilean market is that investors are protected from inflation thanks to the fact that rental income is always fixed in UF (Unidad de Fomento, readjustability index calculated and authorized by the Central Bank of Chile). Other favorable factors are devaluation and interest rate

The economic sector with a promising growth forecast is energy, especially in companies associated with renewable energy projects. There has also been an increase in demand for office space from technology companies and service startups. Finally, a sector that could have an important development is mining, especially linked to lithium.

Real estate market
The demand for spaces for logistics and manufacturing purposes marks the most important trend of the industrial sector in this country. This has led, similar to its neighbor Costa Rica, to the consolidation of BTS projects and the search for a migration towards more efficient spaces. On the side of the office market, it is interesting the increase in requirements by multinationals, who take advantage of the fact that income levels are at a minimum. The Panama Pacifico projects, of more than 280 thousand m2, and the Tocumen Multimodal Cargo Zone, of 75 thousand m2, are a sample of the scale of projects that are being developed in this market.

Economic Outlook for investment
It is interesting the legislative framework found in Panama and that can encourage new investments. The SEM law for headquarters of multinational companies, the EMMA law for manufacturing companies, the Free Zones law and Law 41 of Panama Pacifico provide the country with the necessary rules to offer a competitive environment for both national and international investors. The largest investment in this country comes from abroad, mainly due to the acquisition of local operations in the consumer and telecommunications industry. Examples of this are Corporación Favorita and Liberty, who have made strategic investments in Rey and America Mobile Supermarkets, respectively. In any case, sectors such as logistics, mining, finance and pharmaceuticals, which are expected to grow significantly by 2023, should not be overlooked.

Real estate market
The corporate sector has been presenting a promising dynamic towards the end of 2022 with a reduction in availability from 30 to 20%. The consolidation of the hybrid work model is expected, while the offices evolve to have a design that promotes efficiency.

The development of last mile warehouses within the urban area is one of the most important trends in the industrial market. Specifically in Lima, the supply of industrial spaces to the south is increasing. Additionally, the levels in income values are expected to rise. In Peru, major infrastructure projects are being developed.

Economic Outlook for investment
In a context of constant political polarization, the truth is that the Peruvian market has important strengths that encourage investment. An example of this is the constant growth that the country has experienced during the last decades. In addition, at the constitutional level, international investments are protected under the same framework as domestic investments.

There are also some economic sectors with good growth projections. The most outstanding are accommodation and restaurants, favored by the reactivation of the tourism sector, extension in opening hours and flexibility of capacity; transport, storage and courier, driven by the dynamism in the land transport service and the recovery of domestic and international air transport; and agriculture, livestock and forestry activities, whose domestically oriented crops and the expansion of exports of certain products, help the sector grow.

Real estate market
The office markets in Mexico have been demonstrating a significant recovery throughout 2022, and performance is expected with optimism for 2023. While absorption has been seen to return to levels comparable to those prior to the pandemic, rental prices remain relatively depressed, but are not expected to take a downward trend. In addition, the market will remain favorable for tenants for a couple more years.

In a historic boom the industrial sector is observed in this country. Availability rates have never reached such low levels and, consequently, rental prices, which had already broken all records, continue to rise. 2023 faces the shortage of industrial spaces in most markets, where not all existing demand can be met.

In Mexico, infrastructure projects stand out. The Mayan Train, the Interoceanic Corridor and the Tultepec – Felipe Angeles Airport highway are projects that seek to improve interconnection in different parts of the country.

Economic Outlook for investment
Mexico is an open economy that, through its network of free trade agreements, guarantees access to international markets. There are many sectors with high investment potential. Key economic sectors such as auto parts, machinery, chemicals, electronics and food represent a great opportunity for investors. Proof of this are important investments that occur in the industrial sector, such as PGIM that has allocated 169.3 million dollars to 3 portfolios in multiple locations throughout the country.

The sectors that have recovered their pre-pandemic level of production are manufacturing, wholesale trade, health and social care services, and professional, scientific and technical services. The manufacturing industry has driven much of the country's economic recovery, as it is the most important sector in terms of its contribution to the economy. It has remained in almost constant growth since the third quarter of 2020. Wholesale trade stands out, which is the fifth largest sector of the economy and represents about 9% of the national GDP. It was one of the ones that experienced the greatest contraction during 2020.

Duván Chaverra Agudelo
Author: Duván Chaverra Agudelo
Jefe Editorial en Latin Press, Inc,.
Comunicador Social y Periodista con experiencia de más de 16 años en medios de comunicación. Apasionado por la tecnología y por esta industria. [email protected]

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