Alternative assets: Industrial, commercial real estate showing resilience in Chile
The uncertainty sparked by Chile’s double blow – the social protests that began in 2019 and the COVID-19 pandemic – have impacted the local economic landscape, with some sectors gaining and others losing.
An ongoing trend by Chilean asset managers to move financial assets to the US and Europe in order to diversify portfolios has accelerated, which has had an impact on asset levels and asset prices in some areas.
Against this background, Chile remains an attractive investment destination. Real estate / infrastructure alternative investments are among those on the radar of domestic and foreign investors and are expected to remain resilient and reflect the trends observed around the world.
These include data centers, logistics infrastructure geared towards the last mile delivery industry, large apartment buildings for the rental market, and life science facilities, said Marc Royer, Managing Partner of Capital Markets for South America at global real estate services company Cushman & Wakefield BNamericas.
“Sectors like industry [real estate] and apartment building [large residential apartment buildings] practically unaffected by price adjustments, ”said Royer from Chile, who previously worked as a senior investment manager at Banco Santander in Spain.
“These two sectors have proven to be very resilient in Chile, as in the rest of the world,” he added.
Chile’s insurance industry is playing a new role in driving the residential real estate sector. Traditionally, insurers have primarily been providers of debt finance to property developers and are now looking to get involved in projects, which is significant as insurers hold billions in assets.
Another trend is investments in the life science sector, for example in pharmaceutical laboratories. “We also think this will be a winner locally,” said Royer.
For example, a Chinese laboratory recently announced that it would build a research and development center and a vaccine production facility in Chile.
“Then there are data centers, out of the need to build more because of remote work and cloud computing,” said Royer.
The broader tech space was a driver of a dealmaking rebound in Chile in the first half of the year. Venture capital funds were key players, with the number of related deals increasing by more than 50% year-on-year. Both local and international investors have focused on companies with high growth potential, with Chile positioning itself as a technology hub in the Andean region, local financial advisor Hudson Bankers said in a recent report.
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Among the sectors that are losing ground are those affected by the effects of the pandemic: the hospitality industry or mainly those focused on business travelers, business offices and parts of the retail sector.
Non-conventional renewable energies, especially solar and wind power plants, also play a prominent role in the portfolio of the resilient sectors in Chile.
In terms of total foreign direct investment in Chile in the first half of the year, the values were among the highest since 2003 according to central bank data. In the first half of 21, foreign direct investment amounted to 7.68 billion US dollars, only 10% below the 8.53 billion US dollars -Dollars for the whole of 2020.
Reinvestment of profits accounted for $ 4.73 billion of FDI in the first half, followed by stock purchases ($ 2.99 billion). Debt securities were down 35% for the period after falling $ 1.33 billion in June.
Headquartered in the United States, Cushman & Wakefield offers a portfolio of residential and commercial real estate services such as strategic planning and research, site selection, property management and asset valuation. With a subsidiary in Chile, the company operates in 60 countries and will generate sales of 7.8 billion US dollars in 2020.