Chile’s office sector becomes the third largest in Latin America thanks to economic growth.

According to reports, Santiago will reportedly add about 658,000 square meters of Class A and AB office space to the commercial market over the next 18 months as a result of demand driven by Chile’s sustained economic growth and high levels of foreign direct investment, the second largest projected addition of office stock in all of Latin America.

The Parque Araucano neighborhood is one area of Santiago that is experiencing significant growth in the office sector due to the high building density and limited land supply in the heart of the “Manhattan” commercial center. Over the next 16 months, it’s anticipated that about 200,000 square meters of office space will open up in this region. Avenida Las Condes is another area where office building construction is progressing quickly.

The Costanera Center in the Providencia neighborhood of Santiago, which consists of 4 office towers, is one of the most significant commercial projects currently under construction in the city. With a height of 300 meters, the Gran Torre Costanera, one of these towers, is currently the tallest structure in South America. The Parque Titanium, a mixed-use development with three towers next to the Rio Mapocho, is another significant project. On a six-hectare park, the project will include more than 55,000 square meters of office space.

According to information compiled by Jones Lang LaSalle, Santiago will have a total of 3,328,000 square meters of office space after the delivery of this new stock, making it the third largest office space in all of Latin America. Despite being less than the commercial hubs of Sao Paulo (3,784,349) and Mexico City (4,600,872 square meters), Santiago’s population is still significantly lower than those of Sao Paulo and Mexico City, respectively.

To ease vacancy rates and lessen the current upward pressure on office rents, Santiago needs new office space. One of the lowest office vacancy rates in all of Latin America is currently found in Santiago, where it is around 3%. The low rates of unemployment, which dropped to 6.6% in Santiago in September and may drop below 6% by December, are another important factor boosting the demand for office space. Additionally, consumer and business confidence has been increasing in Chile, which tends to drive businesses to seek larger office space in anticipation of expanding their workforce. Although vacancy rates will rise as more offices open, it is anticipated that they will still be significantly lower than the region’s averages over the next few years.

The rise in construction costs is one factor that might slow down the pace of construction. The Chilean Construction Chamber’s Construct Cost Index rose by roughly 400 points, or about 9%, between September 2011 and August 2012.