_Colin Fitzgerald: the optimistic office market of South America

I expected the dynamics of the South American market to be different to London, but I was surprised by quite how big the difference is. The Argentinian market has been tough for some time.

The government made the pivotal decision 10 years ago that, following a major financial crash and overwhelming levels of debt, property could only be bought with cash, making it impossible for prospective buyers to take out a mortgage.

Of course, the implications of this are huge, not least with regards to the huge restrictions it placed on inbound investment from overseas.

However, one year in and the new government is already looking to reverse this, with rising mortgage lending and falling interest and inflation rates driving optimism through the markets.

Such tough times seem to have made South Americans extremely resilient – they seem to accept constant crisis as the norm, but I sensed an overwhelming feeling of having survived the toughest times, with better times on the horizon.

Meeting with our team in Argentina alongside their tenants and developers confirmed that: they all felt that though Argentina is still behind many markets in economic terms, it is nonetheless on the way up.

Mortgage companies are also beginning to come back to the fore, with leading banks predicting lending to triple by 2020 as economic sentiment improves and locals’ trust in the banking system is restored. Argentina felt like a positive place to be.

After a few days in Argentina, it was on to São Paulo in Brazil. My first impression of São Paulo was its size: it is HUGE. With a population of 12 million, the city is pretty intimidating; a congested metropolis with towering grey concrete blocks, heavy traffic and plenty of smog.

But it didn’t take long for me to discover that there’s plenty of relatively high tech office buildings boasting dynamic clients who are employing innovative uses of workspace, such as activity-based working.

I was in South America to explore and understand things more due to the increasing interest and  client demand to be there. This demand was reiterated by the clients we met who were based in Switzerland, Germany and the UK respectively; I hadn’t realised how strong South America’s connectivity with Europe is.

I arrived in São Paulo slightly bemused by all the chaos – but I left incredibly impressed by the quality of people, knowledge and understanding of real estate. Our head of office there, Marina, is a formidable lady with a strong business focus and I look forward to working closely with her over the coming months.

My final stop on my tour of South America was Rio, where the office market currently has a not insignificant vacancy rate of 40%. This follows the huge expenditure and construction in the run-up to the Olympics and World Cup which has left buildings and infrastructure redundant and a negative feeling amongst its people.

However, it wasn’t all bad news. Throughout my trip I was given the impression that this figure is decreasing. I met with leading pension funds in Brazil to discuss its real estate investment strategy and the view was largely that Rio was the ‘comeback kid’ – it’d been throughout the worst and things could only improve – and this claim was supported by the high numbers of manufacturing facilities with offices there. 

They say that travel broadens the mind, and that’s certainly been true in this instance. I may have arrived with mental images of bright sunshine, excellent steak and world-class skills on the football pitch – but I left with a renewed respect for the South American property market and the buoyant optimism of those based there.