BMI View: The Chile commercial real estate sector is characterised by falling demand, rising vacanciesand downward rental rate trend. Economic and political instability weigh on business sentiment, curbingdemand for commercial property and limiting potential for market gains. The end of the year may bearsome fruit, although this is reliant on a favourable result in the Nov. elections and a return tomacroeconomic stability.
The Chile economy will be tested in 2017. The labour market continues to be weak, the mining sector is indoldrums and consumer and business sentiment are firmly in negative territory. But it appears the worst isbehind the Andean nation, and market consensus is for a recovery in the broader economic situation.However, there remain considerable hurdles ahead in order for the economy to return to a more stablegrowth environment.
Contraction in the commercial real estate sector accompanies the tenuous economic condition. Rentals arein a downward spiral as demand falls, and we believe there will be little room for investment opportunityuntil the situation bodes more promise. The activity in the market that will take place will mostly focus onSantiago, which we expect to maintain occupier focus whilst the business environment trudges along, Thecity of Valdivia will observe muted demand and little introduction of new supply, although, this mayactually help to stabilise rents in the mid-term, and prevent a long, drawn-out decline.