GDP growth is expected to be less than what was experienced in 2023 (2.8%), and considerably less than in 2022 (4.0%). Fitch expects the Mexico nearshoring-induced industrial boom to continue to gain steam, even though the American economy is at risk of slowing. Shopping malls did better than the pundits predicted in 2023 and Fitch believes this will continue due to strong cash flows and sound liquidity for most large mall owners. It doesn't believe most retail tenants it follows will have issues handling inflation-adjusted rents this year.
Fitch Ratings paints a cautiously optimistic picture for the Latin American real estate sector in 2024, buoyed by an expected uptick in regional GDP growth to 2.3%, compared to 2.8% in 2023 and 4.0% in 2022. The Latin American Real Estate Outlook Report 2024 suggests that the momentum will be fueled by several factors:
Industrial Boom: Nearshoring trends continue to propel demand for industrial properties, particularly in Mexico (BBB–/Stable). Despite economic headwinds like potential U.S. slowdown, high inflation, and tight financial conditions, strong occupancy rates and rent growth are expected, with Fitch anticipating high-single-digit revenue and EBITDA growth for issuers in this sector.
Shopping Malls Hold Steady: Despite the rise of e-commerce, well-managed shopping malls remain a resilient cornerstone of the market. Fitch expects them to maintain their strong cash flow generation and sound liquidity, bolstered by inflation-adjusted rents, high collection rates, and limited occupancy rate volatility.
Office Market Gradually Climb: The office market is predicted to see a slow and steady recovery in both occupancy rates and rents. While factors like oversupply and hybrid work may dampen the pace, the overall trajectory remains positive.
Robust Credit Profiles: LatAm real estate credit profiles have demonstrably improved, underpinned by strong balance sheets, healthy access to capital, and stable operating metrics. Low near-term debt maturities and high levels of unencumbered assets further bolster this financial stability.
The report acknowledges challenges including that high-yield issuers may face limitations due to their scale and operating environment, while external risks like geopolitical uncertainties, inflation, and tight financial conditions are cause for concern.