Gradual improvement in occupancy rates and rents is expected to continue beyond 2025

Retail space and shopping malls in major markets such as Mexico and Brazil are expected to maintain strong operating metrics, with rent increases at or above inflation, high collections, and stable occupancy rates. In Chile, growth is likely to be modest, reflecting a gradual recovery in private consumption as the labor market improves. In Argentina, growth is anticipated to remain subdued, though an improvement in consumption may provide an upside for mall operators.

For the regional office segment, issuers prioritize higher occupancy over rent increases. Gradual improvement in occupancy rates and rents is expected to continue beyond 2025, although the pace may be moderated by factors such as oversupply and the prevalence of hybrid work models.

Latin American real estate credit profiles exhibit low to moderate credit risk, supported by strong financial health, healthy capital access, and stable net operating income. Sector leverage remains manageable, with adequate liquidity profiles, minimal near-term debt maturities, and significant unencumbered assets, providing a stable foundation despite potential challenges.

Fitch’s Latin America Real Estate Outlook 2025 is available at www.fitchratings.com.

Headline Image: Shopping mall. Photo credit: stevepb from Pixabay.

In order to size the office market in each of the cities, the ratio of square meters of offices per 1,000 inhabitants was calculated. From this analysis, it turned out that Santiago de Chile leads the ranking with a ratio of 234, followed by Bogotá with 167, Lima with 161, Sao Paulo with 151 and Buenos Aires is in the lowest position, with 96.

According to the specialists at Cushman & Wakefield Southern Cone, the number of office buildings that a city holds, is useful to measure and understand the amount of investment in long-term assets for each country, and the conditions of the financial system, since capital-intensive investments depend highly on it.

Bogotá and Lima in the footsteps of Santiago

The study shows that Santiago de Chile has an inventory of premium offices of 1.67 million square meters, which exceeds the inventory of Lima, Bogotá and Buenos Aires, given that this market offers very good conditions for long-term investment. This translates into good accessibility to financing sources and a stable market, the main attraction for making this type of investment. In addition, Chile has a very solid savings system based on the AFPs, which must be invested locally, and provides greater drive to the demand for long-term assets.

Andrea Duque, head of research for Cushman & Wakefield

However, this solid savings system is a barrier to foreign capital entrance, added to the fact that the return on investment in capital-intensive assets is still low. This could limit the growth of the market, and make local investors to look for other markets with similar investment conditions.

Lima is currently positioned as one of the most important emerging office markets in South America, behind Santiago de Chile, an established continental market. It doubled its office inventory in the last five years, reaching 1.58 million square meters. A consistent economic policy, with relatively low funding rates, supported long-term investment.

Andrea Duque, Head of Market Research at Cushman & Wakefield Colombia, says: “Bogotá shows development similar to Lima. The Class A office inventory registered a growth of 57% in the last five years, reaching 1.43 million square meters and on top of it all, the city recorded in 2018 an important demand for this kind of spaces, driven by a context of investor confidence. ”

Sao Paulo and Lima lead in built meters, and Buenos Aires in projected meters

The data collected shows that between 2014 and 2018, Sao Paulo and Lima were the cities that had the largest new surface production, followed by Bogotá and Santiago. Buenos Aires has been left behind not only by the unstable political and economic conditions of recent years, but also because financing for long-term investments is very scarce. The office market is capital-intensive and financing is required to develop new projects.

Buenos Aires has the largest volume of meters under development and planned for the next five years, which validates the potential of the office market for developers. However, although it has the largest amount projected, it is combined with the lowest amount produced, given the difficulties that investors have to carry out their projects in a market without financing.

On the other hand, when observing the market cycle, Buenos Aires is in a state of “High rental prices” with an average of US $ 33 square meters / month. This is partly preserved by the small size of the inventory of Premium offices. However, political and economic instability are impacting the income level, which begins to decline and provides future opportunities for tenants.

“Bogotá presents stable rental prices and in some cases decreases, with an average of US $ 20.2 square meters / month. This situation is ideal for tenants who need to renew their contracts, for those looking for properties to rent, to expand their offices or willing to move to a building with better features,” said Juan Carlos Delgado, Country Manager of Cushman & Wakefield Colombia.

Juan Carlos Delgado, Country Manager of Cushman & Wakefield Colombia

The markets of Santiago, with an average rental price of US $ 19.5 square meters / month, Sao Paulo, with an average rental of US $ 23.6 square meters / month, and Lima, with an average rental of US $ 17, 3 square meters / month, have slowly growing rental prices, which could lead in the future to an opportunity for investors.

Santiago and Buenos Aires have the lowest vacancies

When comparing the vacancies of each one of the cities, it can be noticed that Santiago holds the lowest vacancy rate with 4.3%, after a period of five years with little production and large developments that are still waiting to be finished. It is followed by Buenos Aires with 6.3%, a vacancy that remains low, as a result of a structurally small market. Bogotá (9.9%), Lima 20.2%) and Sao Paulo (21.6%) have higher vacancies, but with a downward trend

Additional Data

These report findings were shared with Finance Colombia by Cushman & Wakefield.