Latin America's robust growth continues

Latin America remains a retail real estate investment powerhouse, given its expanding middle class and other healthy macroeconomic factors, panelists said Wednesday at the Conference of the Americas, in São Paulo, Brazil. This year’s A.T. Kearney global retail development index of emerging markets, long dominated by Asian countries, contains four Latin American countries: Brazil, Chile, Peru and Uruguay. 

The pace of development in Latin America varies from country to country. Chile, with a population of about 16 million, boasts one of the most mature mall markets in the region, with 65 centers that generate some 22 percent of the country’s retail sales. Ten more centers are being developed there, but Chilean developers and retailers are focusing more on neighboring Peru and Colombia, said Christian Menichetti, executive director of Chile’s Patio Gestión Inmobiliaria, a shopping center developer that is investing in Peru. 

Colombia offers a bounty of prospects, boasting 20 cities with populations of more than 300,000, said David Toledo, general manager of Unico Outlet Center, a chain of outlet malls. Unlike in the rest of the region, which has moved away from the condominium ownership model to that of single-owner malls, Colombia’s retail real estate development boom is driven by both formats, because there are still local retailers there who prefer to own their own space, Toledo said. This is one of the tests that international retailers still face when entering the market, he said.

Peru is expected to have 45 shopping centers in total by year-end, up from just eight in 2002. That will probably double over the next three years, as local and foreign developers set their sights beyond Lima, said Gonzalo Ansola, president of Peru’s mall trade group. As in Brazil, Colombia and Mexico, the middle class in Peru has been growing. It now stands at nearly 37 percent of the population, up from 31.7 percent five years ago, said Ansola. 

Uruguay may be one of Latin America’s smallest countries, but the lack of department store chains there has made it fertile ground for domestic and international retailers, said Mario Garbarino, an Uruguayan mall developer. Moreover, though the country boasts only 175,000 square meters (nearly 1.9 million square feet) of gross leasable area, shopping centers account for 49 percent of retail sales — one reason the vacancy rate continues to be less than 4 percent. And Uruguay gets some 2 million visitors yearly, a figure the government is trying to boost, said Garbarino. 

Rosy as the retail industry and macroeconomic figures may be, Latin American executives caution that the industry does face hurdles. In Brazil, for instance, international retailers struggle with complex fiscal and import restrictions. Mall operators there and in Colombia and Peru also contend with a scarcity of worker talent. But ICSC’s educational programs are helping bridge that gap, speakers said. “Latin America’s industry must now get in the same boat and row in the same direction,” said Ansola. “Having moved from not seeing the forests for the trees, it is time to seize this unique growth opportunity that happens only once in a lifetime.” 

ICSC SCTWeek October 19th, 2012