Marktbericht Lateinamerika Oktober 2011

Strong capital inflows in the first half forced policy makers in Latin America to navigate a path between rising prices and appreciating currencies.
However, investors are viewing the region with more caution in the wake of global market volatility, which has led to the depreciation of local currencies.

Executive Summary

Macro Themes

• Strong capital inflows in the first half forced policy makers in Latin America to navigate a path between rising prices and appreciating currencies.
  However, investors are viewing the region with more caution in the wake of global market volatility, which has led to the depreciation of local currencies.
  
• Central banks have indicated a willingness to adjust monetary policy if the global economic outlook worsens.
  
• Mexico’s recovery is dependent on the US economy due to the close commercial ties between the countries.
  
• South America’s ties to the US are not nearly as strong, but there is concern that a global slowdown will reduce demand for exports and lower the price of exports, especially commodities.
  
• Strong employment and wage growth are boosting demand in Brazil. Inflation is a concern, although the increases have slowed in recent months as the global economy has cooled.
  

Implications and Outlook for Commercial Real Estate

• Transaction volume and prices are on the rise in South America, particularly Brazil and Chile.
  
• Prices in Mexico remain depressed, with acquisition yields still about 150 bps above pre-crisis levels.
  
• Banks in the region are returning to finance commercial real estate.
  
• The evolution of local capital markets provide new sources of funding for real estate – the IPO market is active in Brazil, the first FIBRA was launched in Mexico in 1Q11 and issuance of listed real estate securities is rising in Brazil and Mexico.
  
• Absorption rates are up across the board. Rents are declining in Mexico and increasing in Brazil and Chile.