Look for Growth in Latin America in 2010

Look for Growth in Latin America in 2010
NAI GLOBAL Blog Post
April 16, 2010

As we roll into the 2nd Quarter of 2010 and see positive numbers and prospects for commercial real estate in Latin America, one may wonder how the region was affected, if at all, during 2009. Well, as I predicted in late 2008, during 2009 Latin America, with few exceptions, did not suffer the full brunt of the global recession caused by the problems in the US and Western European financial markets. Given that Latin American developers do not generally rely upon financing and credit services for their real estate development, the region was saved from the worst of the recession - most real estate projects and capital investments are completed with cash and not with credit. (These characteristics have limited growth historically, allowing demand to fairly consistently exceed real estate supply.) This is a major reason why the credit/financing crisis is not negatively impacting the region as much as in the 1st tier economies; we will not see the distressed properties situation that is occurring in the US. More than a decrease in available financing and credit, the ripple effect of decreased global demand affected the consumer markets in Latin America.

The region overall saw its economic growth rate decrease only about 2.6%. However, those markets that did suffer the most were Mexico (due to its interdependence with the US economy), Venezuela (due largely to the poor macro and microeconomic policies of the current administration) and the Caribbean island countries. This latter group felt the effects rather strongly given that their economies are highly dependent upon tourism; there was a steep decline in international travel and hotel/resort development and investment.


For most of Latin America the recession did not hit them the hardest until the first quarter of 2009, however, by the end of the 3rd quarter the major real estate markets of most countries began to show signs of increased demand and greater rental activity. By the end of the 4th quarter, demand and sales activity definitely showed strong increases and signs of a recovery were obvious. This being said, during 2009 in the region’s major markets, office, industrial and retail activity was still relatively healthy as compared to the larger and more institutionalized markets of the US and Europe. Compared to 2008, absorption decreased as much as 20% depending upon the market. Whereas in the US and Europe, ...

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