New Business market report from Business Monitor International: "Peru Real Estate Report Q2 2014"

Boston, MA -- (SBWire) -- 03/13/2014 --BMI expects that the real estate sector in Peru will continue to experience strong growth in the next few years as a result of strong economic growth, a burgeoning middle class, substantial investment in new infrastructure projects, the continued expansion of Peru's export sector as well as a continuing trend of increasing levels of foreign direct investment (FDI).

Over the long term, we anticipate net yield on commercial real estate investment in Lima and Arequipa to remain between 5-7%, the vacancy rate to stabilize at between 8 and 10 percent and growth in the construction industry to increase at roughly 7.5% a year over the next five years.

While our growth outlook for Peru's commercial real estate sector over the next few years remains relatively strong, there are indications that real estate prices in Peru may be reaching their peak. Softer demand from China for mineral exports will threaten the economic trajectory of Peru, in particular the office and industrial segments.

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Furthermore the reason prices for real estate increased in the first place, was that land in Peru was comparatively cheaper than in neighbouring countries. This resulted in a spike in demand for real estate in Peru. However, the price of land in Peru is catching up with prices in neighbouring countries. Losing this comparative advantage may result in a decrease in demand for real estate.

Presently Peru has substandard infrastructure which may act to deter trade and investment. However, having said this, the low base of infrastructure provides plenty of opportunities and scope for growth that may encourage international companies to set up base in Peru. In the period up to 2016, the Peruvian government is expected to invest US$20bn in infrastructure projects including the Longitudinal de la Sierra highway, the expansion of the Lima metro system and the expansion of Callao city's Jorge Chavez international airport. In particular investments such as the second Metro line as well as the expansion of the Metropolitano Bus Rapid Transit network will put upward pressure on rents in Lima.

These projects will inevitably have a knock-on effect on the price of and demand for commercial real estate. As evidenced by Lima's exceptionally low office vacancy rate, there is already a large demand for office space as international companies scramble to set up operations in Peru. The demand for office space, is obviously dependent on the continuing development of Peru's mineral sector.

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