Shannon Robertson: Green Generating Growth

Real Estate Investment and Development Trends in Latin America

By Shannon Robertson

Multinational business expansion, commodity demand and foreign direct investment are driving economic growth in Latin America. As a result, real estate investment opportunities are growing throughout many of the largest markets and cities in Latin American countries, and sustainability initiatives are playing a role in advancing economic stability.

Recent industry research released by Jones Lang LaSalle  analysing Latin American real estate suggests a trend in these markets: that the strongest-performing economies, which are best positioned to grow and accommodate urbanization, are those that have made investments in sustainable real estate solutions. These markets have witnessed lower office vacancies and spikes in development over the last year.

  • Lima, Peru: The 6.3 percent GDP growth has helped overall office vacancy rate fall to 1.1 percent.
  • Santiago, Chile: Vacancy rates are now a low 3.7 percent and office rents are growing, even as development and construction projects for new space continue.
  • Bogota, Colombia: Despite booms in construction and development projects to accommodate the massive foreign investment, vacancies are at their lowest since 2008.
  • Sao Paulo and Rio de Janeiro, Brazil:  The two largest markets in the country (both are in the top five across all of Latin America) are witnessing spikes in rent to keep pace with the demand for space, regardless of the heavy construction pace that has driven vacancy rates to 13.5 percent in Rio and to more than16 percent in Sao Paulo.

Source: Jones Lang LaSalle Inc.

As international companies and investors focus more on Latin American operations and holdings, cities are facing more pressure to address issues relating to energy efficiency and climate change.

To take action and implement real estate solutions that accommodate growth, advance workplace productivity and benefit the both the environment and economies, Latin American businesses and communities are partnering with organizations and programs, such as Carbon Disclosure Project’s Cities program (CDP), that understand the impact of energy and sustainability initiatives on driving long-term growth.

Companies and economies must provide employees, customers and communities with spaces to promote safety, health and well-being, starting with the quality of the air they breathe and the water they drink. Investors need assurance that cities have sustainability plans in place that will accommodate population and economic growth and address climate change issues. Environmental sustainability has become a business priority, not an option.

Five years ago, I saw this trend in full force when a Mexico City office building was the first in the city to receive LEED Gold certification from the U.S. Green Building Council.  Fast forward to 2013, and we see sustainable and energy-efficient solutions as critical considerations for growth across all sectors. For example, international investors and industrial tenants looked to Monterrey, Mexico, when they demanded (and were willing to invest in) large, sustainable industrial space. Now, Monterrey is one of the leading industrial hubs in all of North America.  Recently, a global telecommunications provider worked closely with its regional real estate teams to identify and implement sustainable management and construction practices across its 2,000 retail locations in six LatAm countries. This led large and small cities across the region to learn and implement the companies’ green building policies to accommodate both employees and customers.

The economy-to-sustainable-solutions correlation is still gaining momentum across many markets. Cities like Rio de Janeiro and Sao Paulo, both of which hosted global climate summits in recent years, established higher degrees of awareness to accommodate large-scale, global-stage events. In fact, the 2016 Olympics in Rio are expected to be the most sustainable Olympic Games ever, surpassing the benchmark set by London in 2012.

Nine cities across Latin America report data to CDP Cities, including five that measure and report carbon footprint data: Sao Paulo, Bogota, Buenos Aires, Rio de Janeiro and Curitaba. Relative to other reporting cities around the world, those five share all the characteristics of low-emission cities; for example, all have relatively large populations and are densely populated— two factors that help minimize per-capita environmental impact.

These moves toward sustainability are helping Latin American cities compete on a global stage.  Sustainability is an increasingly important focus in ensuring clean air and water, infrastructure for transportation and waste disposal, and building standards that promote well-being and productivity of workers.

Shannon Robertson is Latin America regional director for Jones Lang LaSalle Inc.