Key Insights for Investment. Comparison of Industrial Real Estate Markets in Latin America: Brazil, Colombia, and Mexico

Despite some Latin American countries' cultural and geographical proximity, their industrial real estate markets display distinct scenarios. Brazil, Colombia, and Mexico, countries monitored by SiiLA, exhibit unique characteristics and similarities within this property sector. The differences and analogies between these markets unveil the complexity and diversity that define the industrial real estate sector in the region. Understanding these features is imperative for minimizing investment risks.

As CEO of SiiLA, Giancarlo Nicastro says, "The Latin American industrial property market is consolidating, attracting major investors and tenants. The regions monitored by SiiLA have vacancy rates comparable to those in the United States, which currently stands at an average of around 4.5%." This underscores the importance of analyzing the similarities and differences in industrial property markets across Latin American countries.

For instance, Brazil and Mexico share similarities that can be examined using data from the SiiLA Market Analytics platform. It indicates that vacancy rates have remained stable in both nations throughout 2023.

According to the most recent data compiled by SiiLA, the average vacancy rate for Class A and B industrial properties in Brazil is 9.8%. Conversely, during the year's second quarter, the vacancy rate was 9.3%, and in the first quarter, it was 9.8%. In the case of Mexico, the most recent vacancy rate for these assets is 1.9%, while in the second and first quarters, it was approximately 1.9% and 2%, respectively.

In addition to differing vacancy rates, the sizes and market profiles in Mexico and Brazil vary significantly. On the one hand, the industrial inventory monitored by SiiLA in Brazil encompasses approximately 24 million square meters, while the analysis covers 84 million square meters in Mexico. On the other hand, while manufacturing companies constitute about 55% of the industrial gross leasable area in Mexico, consumer goods companies dominate with 33% of the market share in Brazil.

The Growth of the Industrial Market in Colombia

Colombia, neighboring Brazil, possesses a burgeoning industrial market.

Currently, the vacancy rate for the industrial property segment in Colombia stands at 2.9%. In contrast, in the second quarter of 2023, it was 3%, and in the first quarter, it reached 4.7%. In total, this South American country boasts an inventory of over 4.4 million square meters and has incorporated approximately 127,000 square meters so far this year.

Since SiiLA began monitoring the industrial market in Colombia, starting in the fourth quarter of 2020, the industrial segment has grown by just over 44%. In that same period, the market in Brazil expanded by nearly 32%, and Mexico's by just over 50%.

The inventory growth rates in Brazil, Colombia, and Mexico may differ, but all exhibit significant increases in the industrial segment. As for rental values, there is also variation: in Brazil, the average price per square meter is close to $4.9; in Colombia, it's $4.5; and in Mexico, it's $5.5.

Comparing markets in Latin America, such as Brazil, Colombia, and Mexico, reveals the complexities and diversities characterizing the industrial property industry in the region. While they share similarities in vacancy rates and growth, they also present significant differences in market size, tenant profiles, and rental values. These variations underscore the importance of detailed and specific analysis for each market since investment and operation decisions in the industrial real estate sector must consider each country's unique characteristics.

The data and information provided by the SiiLA Market Analytics platform are essential for making informed and strategic decisions to maximize investments in the commercial real estate market. For more information, please contact us at contacto@siila.com.mx.