Looking for Office Space in Latin America? Here’s Where to Look

Bloomberg Línea had exclusive access to JLL’s report on the region’s corporate real estate market. Find out which city has the highest vacancy rate

Vista da av. Faria Lima, em São Paulo
December 20, 2023 | 03:38 PM

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Bloomberg Línea — With the onset of remote work during the coronavirus pandemic, the Latin American corporate real estate sector was hit by a steep decline in demand, with companies continuing to reassess their office space requirements ahead of 2024. However, the worst part of this downturn may well be over, as per a study by the global consultancy JLL to which Bloomberg Línea had exclusive access.

Several of the region’s major cities have been experiencing a resurgence in inventories, with the total supply of office space in the region expected to expand by 4.4% in 2024. An estimated 1.5 million square meters is set to be added by developers next year, according to the report.

The study looked at 21 markets in 17 countries across Latin America and the Caribbean, covering a total of 34.4 million square meters of corporate office space, classifying properties as ‘Class A’ (premium) and ‘Class B’ (medium quality).

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Santo Domingo, the capital of the Dominican Republic, claimed the top spot for the highest asking rent price, averaging US$31 (approximately R$150) per square meter in Class A properties by the end of the first half of 2023, according to the JLL report.


Buenos Aires, Argentina, secured the second position for cities with the highest rental prices, boasting a monthly average of US$ 27/m² (about R$ 135) in Class A.

“The stock in Latin America is younger than that of the United States. This implies, for instance, potential for further development,” JLL’s Head of Research and Market Intelligence, Caio Maia, highlighted.

He further noted that a lower vacancy rate generally has a positive correlation with higher prices. However, other factors such as location also influence asking prices. “If two regions in São Paulo have the same vacancy rate and one of them is Faria Lima, the square meter price there will be higher,” he explained.


São Paulo has the most expensive “for sale” prices

In terms of average asking prices for sales, São Paulo leads the pack as the most expensive market in Latin America in Class A properties, with an average of US$ 5,500 (around R$27,500) per square meter, followed by Buenos Aires (US$5,000/m²).

For Class B spaces, São Paulo is also among the markets with higher values in the region, on par with Santiago, Chile, at an average of US$ 3,300/m² for both.

In spite of its ongoing economic crisis in Argentina, Buenos Aires’ prices are still considerably higher than most other markets, averaging US$ 2,500/m² for Class B spaces, on par with Mexico City, according to the consultancy. Maia mentioned that Argentina still has stock to be delivered.

Largest markets

Mexico City, São Paulo, and Santiago remain the largest office markets in Latin America, representing 22%, 13%, and 9% of the total supply surveyed by JLL, respectively.


The office market has been growing significantly in the region. São Paulo is a reflection of this; there are still around 84,000 square meters set to be delivered in the fourth quarter in the city,” said Maia.

By the end of the first half of 2023, the vacancy rate in the region stood at 21.3%. The market with the highest vacancy rate was Panama City (45%), followed by Rio de Janeiro (36.5%). In contrast, Medellín, Colombia, had the lowest vacancy rate in Latin America, at just 2.9%.

Office Space Availability in Latin Americadfd

Considering the expected deliveries in 2024, vacancy rates are expected to rise in the region, Maia said. “The market is heating up due to the decline in unemployment rates, which could generate opportunities for new developments,” he noted.


Impact of higher interest rate environment

The JLL executive also highlighted that the recent period of high interest rates had a significant impact on the corporate real estate market, resulting in fewer individual and corporate investors channeling funds into the sector.

Now, with the trend of gradually declining interest rates, Maia expressed his belief that more investors will turn their attention to this market. ‘The overall situation is favorable,’ he remarked.

Randall Loker, partner and head of investments for Latin America at Paladin Realty Partners, stated that the drop in interest rates is a net positive for various facets of the real estate business, including the prospects of developing new projects with lower financing costs and improved margins.

“Lower interest rates tend to stimulate economic activity, thereby boosting the demand for rental spaces,” he said.


Risks on the radar

According to Loker, market risks in Latin America mirror those in any other part of the world and can be encapsulated by supply and demand fundamentals.

In terms of supply, most markets witnessed substantial increases after the global financial crisis [of 2008], as Latin America was relatively well positioned economically and experienced a significant influx of capital,” he stated.

He pointed out that all markets faced an oversupply, with many still in the process of recovery. “In the future, I think companies will be more cautious, so the risk of new waves of oversupply will be lower,” he noted.


Concerning demand, Loker evaluated that the crisis experienced by corporate buildings worldwide due to the remote work phenomenon represents a lesser risk in Latin America. This is because, as reported by Loker, most employers are mandating the return of their employees to the office.

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Montevideo, a top pick

Maia singled out the Montevideo market as one of the region’s standouts. Despite having a stock of only 327,000 square meters—equivalent to ten buildings the size of the Infinity Tower, housing companies like Credit Suisse and Bloomberg in the Itaim district of São Paulo—Uruguay’s capital is not expected to deliver new spaces in 2024.

Montevideo closed the second quarter of 2023 with a vacancy rate of 6.5%, a slight decrease compared to the immediately preceding quarter (6.6%), confirming the trend of declining office space supply since 2021.


“Montevideo stands out with very low vacancy rates, stable rental values, and premium stock,” noted Maia.

Loker highlighted Bogotá, Colombia’s market, as a standout in the region, with about a 12% vacancy and consistently positive net absorption every year for roughly the last decade.

Perspectives for Brazil

According to Paladin’s General Director in Brazil, Ricardo Raoul, the asset manager will continue to focus on the office thesis in the medium to long term (3 to 5 years), especially in products considered unique and well-located, such as ‘boutique offices.


We are developing four projects, all with distinctive architecture and located in neighborhoods like Pinheiros, Itaim, Jardins, and Paulista [in São Paulo], historically resilient regions with high demand and low vacancy rates, currently between 10% and 15%,” he stated.

For JLL, the outlook is positive for the office sector in the region. “The report shows a very positive trend for the market, with decreasing unemployment and growing stock [of area]. Movements are happening; there are many transactions taking place,” remarked Maia.