For good reason, multinationals are looking to include Latin America in their overall portfolio strategy, but understanding its diversity of markets and cultures is key.
Let’s start by putting Latin America’s and the Latino demographic’s size and potential in some context. Consider these facts:
- 650 million people live in Latin America, double the population of the U.S.
- Latin America has the fastest rate of urbanization in the world.
- Latin America is rich in commodities and natural resources.
- The largest minority group in the U.S. is the Latino population. In fact, there are more Latinos in the U.S. (approx. 55 million) than there are Canadians in Canada.
- There are more Spanish speaking people in the United States than there are in Spain.
- 70 percent of the client base in the Americas is Latino.
These are aggregated statistics. Latin America and the Latino population aren’t monolithic. The region is comprised of more than 20 countries in North, Central and South America, as well as the Caribbean, each unique in its legal/licensing environment, business dynamics, workforce and culture. That said, multinationals choosing to ignore or underestimate the importance of the region are at risk of surrendering a monumental opportunity.
The existing CRE landscape
We’ll dive deeper into differentiating the levels of advancement in individual Latin American countries and their markets from a site selection perspective in future blogs. For now, though, it’s instructive to point out that some industries - financial services, manufacturing and life sciences – are already well-established in the region, as other verticals are emerging, chief among them data centers, retail and healthcare. A multi-lingual and increasingly educated workforce, relatively low labor costs and time-zone/location considerations are also driving more interest among multinationals in establishing Latin America-based call centers and distribution/logistics centers.
The CRE services industry in Latin America, in general, is admittedly playing catch-up to its counterparts in the U.S. and western Europe, mainly in the areas of facilities management, preventive maintenance and integrated real estate models. Outsourcing such CRE services is a fairly new concept in the region, requiring CRE companies to devote time to educating prospective clients – particularly local companies and Multilatinas (defined as Latin American-based companies that have outgrown their country of origin and have expanded beyond its borders. Many companies are truly global and are major players within their industry).
CRE service providers need to present a business case for the value they offer and contrast that to the traditional practice of relying on internal resources for facilities management and preventive maintenance. They also need to contrast themselves from the brokerage services that have long characterized the Latin American real estate market. Unlike those brokers, reputable CRE companies seek to serve as their clients’ consultant-partners throughout the real estate cycle and over the long-term. They don’t look at the business transactionally, as a series of one-off projects.
Each country in Latin America has its own licensing requirements for brokers. Some have no requirements whatsoever. Nonetheless, any organization considering expansion into this market is going to have to grapple with the same set of complex issues they’d face in any market: developing a comprehensive portfolio strategy, reducing costs, maximizing space utilization, attracting and retaining qualified talent.
The overriding challenge lies in executing expansion into Latin American countries in a centralized manner, moving beyond the legal/fiscal/cultural differences that differentiate countries and, instead, standardizing operations and results. Outsourcing and partnering with a CRE expert who knows the Latin American market can be a distinct advantage.
Including Latin America within a holistic CRE strategy is no easy task, given its more than 20 distinct economies, distinct business/regulatory environments and differing levels of sophistication among CRE service providers, but multinational organizations that successfully navigate and establish a footprint in this emerging, diverse, opportunity-rich region will access a dynamic and increasingly relevant market with more buying power than ever before – a middle-class market and workforce that is the region’s fastest-growing demographic. And with people moving from rural to urban environments at a faster rate than anywhere else in the world there is a need for infrastructure, premium industrial and Class A commercial real estate investment. Continued investment in the expansion of that real estate space in the coming years is an opportunity for companies looking to strategically enhance their CRE portfolio.
Nevardo Arguello
Executive Managing Director, GCS América Latina
212.372.2112
nevardo.arguello@ngkf.com