Regional overview

South America

⏱ 4 min read

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High-tech industries chart a course for growth

Author: Gareth Whisson, Regional Real Estate Lead, Latin America

With elections across the continent, political uncertainty continues. Yet as its economies continue to mature and populations grow, investment is building in high-tech sectors, healthcare and hospitality.

Across 2023 and 2024, all but three South American countries will have voted in their presidential elections – bringing to a head the political turbulence with which the region is often associated. This has contributed to greater caution from some global investors and a softening in economic forecasts. Average GDP growth across the continent is expected to slow from 1.5 percent in 2023 to 1.4 percent in 2024 according to the April 2024 IMF World Economic Outlook.

Despite this, the region’s plentiful labour supply, low costs and low exposure to the economic disruption in Europe and the Middle East make it well placed to benefit from a move to nearshoring of manufacturing and investment in growth industries including industrials, life sciences and data centres.

Current tendering condition

Future market outlook

High-tech, high quality, high investment

The continent remains an inexpensive market for construction. The International Construction Market Survey 2024 report estimates that overall construction cost inflation will ease from 4.3 percent in 2023 to 3.9 in 2024. On the international ranking of overall cost, South American markets all fall into the lower half of the table.

Many of the multi-billion-dollar investments being seen are in high-tech labs. Post-pandemic nearshoring of life sciences manufacturing is helping to cater to growing populations and increasing healthcare demands across the continent.

Another key growth area for South America is the rise of the hospitality sector. The continent has become an increasingly popular holiday destination and premium brands are investing in new high-specification facilities in destinations across Brazil, Colombia, Chile and Mexico.

Headwinds nonetheless remain. Political, economic and institutional instability and rising costs were all significantly impacting construction work in Argentina in our survey.

Argentinian construction demand slowed following last year’s election of Javier Milei as he attempts to stabilise the economy and reduce the economic turbulence that has marred the country for many years. Inflation in the general economy peaked in early 2024 but economists are starting to forecast a precipitous decline in 2024.

These are all factors in why Buenos Aires is now the most expensive market on the continent to build in, at an average cost of US$1,927 per m². With the change in the political landscape and its coinciding impact on the economy, Argentina is beginning to get a place on investors’ watch list, particularly in the natural resources space.

Data centre projects are expanding fast as the massive uptake of digital technology and broadband-enabled devices drive an ever-greater need for data service capacity.

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Growing pains for maturing markets

The demand from specialist global industries like data centres and life sciences is having a profound effect on South American labour markets due to the migration of skilled expertise.

South America has traditionally benefitted from a large and low-cost labour market, which has helped keep inflation down and growth rising. This year’s report shows that sector wages across the continent remain some of the lowest in the world, averaging at US$6 per hour. South America’s average wage has barely changed in dollar terms from 2023.

However, the focus on these new high-tech projects, and the sheer demand for construction labour in places like Santiago and Bogota, has meant an increase in the number of skilled workers being brought in from other regions. Given the low base labour cost, this is not yet having a large impact on overall project expense but has refocused efforts on upskilling the local labour force to meet the specialist demand.

This is natural for markets maturing quickly – and there are other connected trends being seen across the continent.

One might also expect to see more focus on areas such as digitalisation and sustainability as markets mature. Global corporate investors and multinationals are starting to import their own sustainability standards and greater demands for efficiency and digitalisation – which is beginning to drive the agenda forward. South American governments are also procuring net-zero roadmaps for the first time.

These are likely to be areas that evolve fast in the coming years, and clients should be prepared for those changes. Those looking to invest in advanced manufacturing in the region should also be conscious of the potential for bottlenecks of skilled labour, which can be mitigated by focusing on local upskilling and training to provide a long-term pipeline of specialist talent.

Safety and quality are becoming much higher priorities for projects, partly to attract foreign labour, and also to safeguard investment in the high-tech, high-quality control areas like data centres and life sciences.