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Office Market Overview
Latin America | Mid-year 2016
Several countries are hit by falling commodity prices, struggling
export demand, and tightening US monetary policy. Office markets
across the region are experiencing high vacancy and stagnant rents.
Over 2,500,000 m2 of new production in 2015.
Over 1,500,000 m2 of net absorption in 2015.
Vacancy rises 1.3% region-wide Y-o-Y.
Over 5,200,000 m2 of new production over the next two
years will keep pushing vacancy up and rents down.
Buenos Aires, Argentina: The election of a center-right president
could mark a turning point for the Argentinian economy.
JLL | Latin America | Office Market Overview | Mid year 2016
Introduction:
Location Map and Market Clock
San Juan
Monterrey
Panama
City
Guadalajara
Mexico City
Barranquilla
Caracas
Guatemala City
San José
Medellín
Cali
Bogotá
Quito
Guayaquil
Mexico City
Caracas
Lima
Bogotá
Rio de
Janeiro
San José
Peaking market
Falling market
Monterrey,
Medellin
Guadalajara
Rising market
Bottoming market
Lima,
Santiago
Panama
City
Guatemala City,
Rio de Janeiro
Colombia
Caribbean,
Montevideo
San Juan, São Paulo
Buenos Aires
Guayaquil,
Quito,
Cali
São
Paulo
Santiago
Buenos
Aires
Montevideo
1
JLL | Latin America | Office Market Overview | Mid year 2016
3
Executive Summary:
Population by Country and Major Markets, 2015
Montevideo
Uruguay
Panama City
Panama
San Juan
Puerto Rico
San José
Costa Rica
Guatemala City
Guatemala
Guayaquil
Quito
Ecuador
Santiago
Chile
Caracas
Venezuela
Lima
Peru
Buenos Aires
Argentina
Barranquilla
Cali
Medellin
Bogota
Colombia
Guadalajara
Monterrey
Mexico City
Mexico
Rio de Janeiro
São Paulo
Brazil
Major Market Population (millions)
Country Population (millions)
0
50
100
150
200
Source: Oxford Economics (2015)
•
Several Latin American countries have one large city that
accounts for a significant share of the national population. These
include Uruguay, Argentina, Peru, and Chile as well as all Central
American and Caribbean nations.
•
Brazil, Mexico, and Colombia are the three countries with the
most widely distributed populations. Each contains several cities
with over one million inhabitants.
250
JLL | Latin America | Office Market Overview | Mid year 2016
4
Executive Summary:
GDP by Country and Major Markets (USD – PPP)
$2.500.000
$35.000
Country GDP (Billions of USD – PPP)
Major Market GDP (USD – PPP)
$30.000
Country GDP Per Capita (USD – PPP)
$1.500.000
$20.000
$15.000
$1.000.000
$10.000
$500.000
$5.000
$0
$0
Source: United Nations (2014)
•
•
Brazil and Mexico by far have the largest economies in Latin
America. However the countries with the highest GDP per capita
are Puerto Rico, Uruguay, Chile, and Argentina (although Puerto
Rico is in the midst of a decade-long recession).
Currency devaluations across Latin America over the past year
have shrunk the value of several economies in terms of USD,
•
most notably Colombia, Chile, Peru, Venezuela, Argentina, and
Brazil.
In 2015 several Latin American countries saw stagnant growth
and a few – Brazil, Puerto Rico, and Venezuela – saw their
economies contract.
Country GDP Per Capita (USD – PPP)
$25.000
Brazil
Sao Paulo
Rio de Janeiro
Mexico
Mexico City
Monterrey
Guadalajara
Argentina
Buenos Aires
Colombia
Bogota
Medellin
Cali
Barranquilla
Chile
Santiago
Peru
Lima
Venezuela
Caracas
Puerto Rico
San Juan
Ecuador
Quito
Guayaquil
Uruguay
Montevideo
Guatemala
Guatemala City
Costa Rica
San Jose
Panama
Panama City
Country GDP (Millions of USD – PPP)
$2.000.000
JLL | Latin America | Office Market Overview | Mid year 2016
5
Executive Summary:
Total Stock (m²), EY 2015
Mexico City
São Paulo
Santiago
Bogotá
Rio de Janeiro
Lima
Quito
Buenos Aires
Panama City
Caracas
Monterrey
San José
San Juan
Medellín
Guayaquil
Guatemala City
Montevideo
Cali
Col. Caribbean
Guadalajara
-
1.000.000
2.000.000
3.000.000
4.000.000
5.000.000
6.000.000
Rentable Area (m2)
Source: JLL Research (2016)
•
•
•
The largest office markets in Latin America remain Mexico City,
São Paulo, and Santiago. This is consistent with their
reputations as 3 of the primary business hubs in the region.
JLL has expanded coverage in Guatemala City in 2015, bringing
the total number of markets covered in this report to 20.
Adjustments have been made to market data from Quito and
•
Guayaquil compared to past reports due to a change in sample
size.
JLL tracks a sample of approximately 30 million m2 of office area
in Latin America. Over half of this is contained in the 4 largest
markets: Mexico City, São Paulo, Santiago, and Bogotá.
JLL | Latin America | Office Market Overview | Mid year 2016
6
30%
50%
Executive Summary:
Vacancy Rates, EY 2015
Panama City
Col. Caribbean
Rio de Janeiro
São Paulo
San Juan
Monterrey
San José
Lima
Mexico City
Bogotá
Santiago
Guadalajara
Cali
Medellín
Buenos Aires
Guayaquil
Market equilibrium
vacancy rate: 8-12%
Guatemala City
Montevideo
Caracas
Quito
0%
5%
10%
15%
20%
25%
35%
40%
45%
Source: JLL Research (2016)
•
•
Panama City demonstrates by far the highest vacancy rate in
Latin America, and one of the highest in the world. It is
characterized by a high proportion of hedge real estate
investments made with capital originating in other countries.
8 cities are above the “equilibrium” vacancy range of 8-12%,
which means they are oversupplied and tenant-favorable at the
moment.
•
6 cities have a vacancy rate that is below the market equilibrium
range. These include Buenos Aires, Caracas, and Quito, which
have seen limited new supply because of market uncertainty.
Montevideo, Guayaquil, and Guatemala City have low vacancy
rates because they are small markets and most developers are
reluctant to introduce new product since demand is so low.
JLL | Latin America | Office Market Overview | Mid year 2016
7
Executive Summary:
Change in Vacancy (m2), Y-o-Y
-2,4%
Montevideo
Monterrey
-1,6%
Cali
-1,2%
-0,5%
Guatemala City
-0,5%
Caracas
Quito
0,2%
Santiago
0,2%
Buenos Aires
0,3%
São Paulo
0,8%
Mexico City
1,0%
San José
1,1%
Guayaquil
1,4%
San Juan
1,5%
Guadalajara
2,8%
Medellin
4,0%
Panama City
4,3%
Rio de Janeiro
4,6%
Bogotá
5,3%
Lima
10,0%
Colombia Caribbean
-5%
19,2%
0%
5%
10%
15%
20%
Y-o-Y Change in Vacancy Rate
Source: JLL Research (2016)
•
•
The Colombia Caribbean (mainly Barranquilla) has seen the
highest Y-o-Y rise in vacancy, as it went from 8% to 27% in
one year.
Only five cities – Montevideo, Monterrey, Cali, Guatemala City,
and Caracas - have seen a net drop in vacancy over the past
year, and it has been a small change.
•
•
Vacancy has risen in ever other city, given that many are in the
middle of a building boom that is leaving considerable excess
space available.
Santiago, Lima, and Bogotá, three major markets that have
been landlord-favorable for the past decade, are now moving
towards a more tenant-favorable dynamic.
25%
JLL | Latin America | Office Market Overview | Mid year 2016
8
Executive Summary:
Production (m2), Y-o-Y
Mexico City
São Paulo
Lima
Bogotá
Panama City
Santiago
Rio de Janeiro
San José
Quito
Medellín
Monterrey
Col. Caribbean
Buenos Aires
Guayaquil
Montevideo
Guatemala City
Caracas
Cali
Guadalajara
San Juan
-
100.000
200.000
300.000
400.000
500.000
600.000
700.000
Rentable Area (m2)
Source: JLL Research (2016)
•
•
Mexico City led the region in office production this year with
675,000 m2 of new deliveries in 2015.
Production outpaced net absorption in all LatAm markets in 2015
with the exception of 6: Cali, Quito, Guayaquil, Monterrey,
Guadalajara, and Montevideo.
•
A handful of markets – Mexico City, Lima, and Colombia
Caribbean - saw record office production in 2015.
800.000
JLL | Latin America | Office Market Overview | Mid year 2016
8
Executive Summary:
Net Absorption (m2), Y-o-Y
Mexico City
São Paulo
Santiago
Lima
Bogotá
Quito
Panama City
Monterrey
San José
Guayaquil
Medellín
Buenos Aires
Caracas
Rio de Janeiro
Guatemala City
Guadalajara
Cali
Col. Caribbean
Montevideo
San Juan
-100.000
-
100.000
200.000
300.000
400.000
500.000
Rentable Area (m2)
Source: JLL Research (2016)
•
•
With 470,000 m2 of net absorption, Mexico City was responsible
for nearly 1/3 of the net office absorption in Latin America for
2015.
7 of the 10 most active markets in terms of demand belong to the
Pacific Alliance, a reflection of the relatively optimistic outlook in
•
•
these countries.
San Juan saw negative net demand for the 4th straight year. No
other city had negative absorption in 2015.
Santiago, Bogotá, and Lima had strong years for demand despite
adverse conditions facing their exporting industries.
9
JLL | Latin America | Office Market Overview | Mid year 2016
Executive Summary:
Production Pipeline (2016-2017) vs. Current Stock (m2)
18%
Mexico City
14%
São Paulo
28%
Bogotá
33%
Lima
21%
Monterrey
130%
Guadalajara
15%
Rio de Janeiro
8%
Santiago
20%
Quito
16%
Panama City
14%
Buenos Aires
*Data label shows percentage growth
in stock, Q1 2016 – Q4 2017
16%
San José
13%
Caracas
23%
Medellín
48%
Col. Caribbean
12%
Guayaquil
9%
Guatemala City
12%
Cali
0%
San Juan
Current Stock
0%
Montevideo
-
Production, 2016-2017
1.000.000
2.000.000
3.000.000
4.000.000
5.000.000
6.000.000
Rentable Area (m2)
Source: JLL Research (2016)
•
•
Mexico City has over 1,000,000 m2 of new production in the
pipeline through the end of 2017, representing a growth of 18%
over existing stock.
The markets that will grow the most over the next two years in
proportion to their current size are Guadalajara - which will more
•
than double in the next 2 years – as well as Lima, Bogotá,
Medellin, and the Colombia Caribbean.
Low demand continues to impede any new supply in Montevideo
and San Juan.
JLL | Latin America | Office Market Overview | Mid year 2016 10
Executive Summary:
Average Asking Rents, EY 2015
Caracas
Montevideo
Rio de Janeiro
Buenos Aires
Mexico City
São Paulo
Lima
Guadalajara
Bogotá
Santiago
Panama City
*All rents are at the December 2015
exchange rate.
Quito
Monterrey
San José
San Juan
Col. Caribbean
Guayaquil
Average Rent
Class A
Medellín
Cali
Average Rent
Class AB
Guatemala City
$-
$5
$10
$15
$20
$25
$30
$35
$40
Average Rent (USD/m2/month)
Source: JLL Research (2016)
•
Caracas rents are comparable to other markets when considered
at the parallel exchange rate (~1,000 VEF/USD). However,
multinational companies who cannot resort to this method must
use the official rate (6.3 VEF/USD) which is wildly overvalued
and pushes rents up into the $800 - $2,000/m2/month range.
•
•
The lowest rents in Latin America by far are in Guatemala City,
where Class A offices are leasing at between USD $1011/m2/month.
Despite the devaluation of the Brazilian Real and falling demand,
rents remain high in Rio de Janeiro due to geographical
restrictions that limit new development.
$45
JLL | Latin America | Office Market Overview | Mid year 2016 11
Executive Summary:
Change in Average Rents, Y-o-Y
Caracas
Guatemala City
Mexico City
San José
*All rents are at the December 2015
exchange rate.
Buenos Aires
Guadalajara
Monterrey
Percent Change:
Class A Avg. Rent
San Juan
Cali
Percent Change:
Class AB Avg. Rent
Guayaquil
Montevideo
Lima
Panama City
Medellín
Quito
Santiago
Col. Caribbean
Bogotá
São Paulo
Rio de Janeiro
-50%
-40%
-30%
-20%
-10%
0%
10%
Change in Average Rents, Y-o-Y
Source: JLL Research (2016)
•
•
Rents have fallen nearly across the board in Latin America, in
line with rising production and stagnant demand. This has been
intensified by exchange rate devaluations, which have affected
some countries more than others.
Brazil has seen the sharpest fall, with Class A rents in São Paulo
and Rio falling around 40% since last year.
•
•
In Mexico, Monterrey and Guadalajara have seen a decline in
rents owing to exchange rate volatility, however rents in the
capital city have remained stable.
Rents fell sharply in Colombia. In Bogotá oversupply has pushed
rents down in local currency while the devaluation of the COP
has pushed rents down in dollars in all 4 Colombian markets.
20%
JLL | Latin America | Office Market Overview | Mid year 2016 12
Executive Summary:
Production and Absorption of Major Markets, 2008-2018
2.500.000
Mexico City
Sao Paulo
Rio de Janeiro
Santigo
2.000.000
Bogota
Lima
Rentable Area (m2)
Panama City
Buenos Aires
1.500.000
1.000.000
500.000
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: JLL Research (2016)
•
•
The US recession of 2008 triggered a building boom in Latin
America´s major cities. Damaged consumer confidence and low
interest rates led many investors to pursue high returns in
emerging markets, resulting in a sharp increase in new supply of
office buildings. This boom intensified from 2012-2015.
However investors and developers are becoming more reluctant
•
to start new projects as falling rents and high vacancy are driving
yields down.
Consequently, cities like Bogotá, Santiago, São Paulo, Mexico
City, Lima, and Panama City will begin to see production fall after
the next two years as the markets adjust to oversupply.
JLL | Latin America | Office Market Overview | Mid year 2016 12
Executive Summary:
Regional Production and Absorption, 2012-2015
3.000.000
20%
Production
18%
Net Absorption
2.500.000
Vacancy Rate
16%
14%
12%
1.500.000
10%
8%
1.000.000
6%
4%
500.000
2%
-
0%
2012
2013
2014
2015
Source: JLL Research (2016)
•
•
In the aggregate, 2015 saw the delivery of 2,550,000 m2 of new
supply and a net absorption of 1,550,000 m2. Production is
outpacing demand nearly across the board.
Demand was surprisingly strong in places like Lima, Bogotá,
Santiago, and Brazil where markets have been battered by falling
•
commodity prices. Falling commodity prices have been
counterbalanced by rents that have fallen in dollar terms,
motivating many companies to upgrade or consolidate. This
explains much of the significant increase in demand over 2014.
Vacancy region-wide is at 15%, up from 13.8% a year ago.
Vacancy Rate
Rentable Area (m2)
2.000.000
JLL | Latin America | Office Market Overview | Mid year 2016 13
Market Snapshots
Buenos Aires, Argentina
15
São Paulo, Brazil
16
Rio de Janeiro, Brazil
17
Santiago, Chile
18
Bogotá, Colombia
19
Medellín, Colombia
20
Cali, Colombia
21
Barranquilla, Colombia
22
San José, Costa Rica
23
Quito, Ecuador
24
Guayaquil, Ecuador
25
Guatemala City, Guatemala
26
Mexico City, Mexico
27
Monterrey, Mexico
28
Guadalajara, Mexico
29
Panama City, Panama
30
Lima, Peru
31
San Juan Puerto Rico
32
Montevideo, Uruguay
33
Caracas, Venezuela
34
Comparison of market leasing practices
35
Contacts
36
JLL | Latin America | Office Market Overview | Mid year 2016 14
Argentina – Buenos Aires
Macroeconomic overview
• The election of Mauricio Macri in 2015 signifies a potential change
of course for the Argentinian economy. Meanwhile the opposition
is growing increasingly fragmented with several congressmen
leaving the opposition block. This should make Macri´s proposed
reforms easier to pass.
• The Macri government has discontinued expensive energy
subsidies and is expected to proposed other spending cuts to put
the country on a more fiscally sustainable path. He is also
beginning an overhaul of the INDEC, the government statistical
bureau, to restore transparency and integrity in key indicators.
• A USD $16.5 billion bond issue was emitted in April to settle the
government´s holdout with international creditors. This has paved
the way for Argentina to return to international debt markets, and
issuances are likely to increase in the second half of 2016.
• The Argentinian peso has been one of the few currencies
worldwide to hold its ground over the past year against the dollar.
However it could begin to slip by the end of the year as the
Central Bank gradually allows monetary policy to loosen.
Office market statistics
Total stock (m²)
1,307,000
Overall vacancy rate
7.2%
Production - 2015 (m²)
32,000
Net absorption – 2015 (m²)
26,000
Expected production – 2016 (m²)
100,000
Expected net absorption – 2016 (m²)
50,000
Class A rental range (USD/m²/mo.)
$27 – 30
Class AB/B+ rental range (USD/m²/mo.)
$18 – 25
Average purchase price range (USD/m²)
$3,300 – 4,400
Historic production, absorption, and vacancy
• Capital market transactions have been more prevalent than
leases, as companies look to hedge currency risks by purchasing
assets.
• Vacancy seems to have stabilized in the 6-7% range. Rents fell
by -1.2% Y-o-Y on average.
• Over 100,000 m2 are scheduled for completion in 2016, a sharp
increase over the past few years that should raise vacancy.
200.000
180.000
160.000
140.000
120.000
100.000
80.000
60.000
40.000
20.000
-
Production
Absorption
Vacancy
Forecast
30%
25%
20%
15%
10%
5%
0%
Vacancy Rate
• In an election year characterized by uncertainty and risk aversion,
the market was relatively quiet with only 25,000 m2 of net
absorption. The majority of this – 18,000 m2 – was concentrated
in the AB segment.
Rentable Area (m2)
Market trends
JLL | Latin America | Office Market Overview | Mid year 2016 15
Brazil – São Paulo
Macroeconomic overview
Office market statistics
• Brazil is currently experiencing one of the worst recessions in its
history, with the economy likely to contract by at least 4% in 2016.
Total stock (m²)
• Inflation has moderated somewhat this year, though at around 9%
Y-o-Y in May, it is still well above the Central Bank´s target rate.
Interest rate cuts this year are unlikely.
Overall vacancy rate
• Amidst economic mismanagement and a ballooning corruption
scandal at Petrobras, the state-run oil company, the Brazilian
Congress and Senate have voted to impeach Dilma Rousseff. Yet
her Workers Party has fought back, accusing the opposition of a
coup and pointing to the fact that many politicians leading the
impeachment proceedings are themselves under investigation for
involvement in the Petrobras affair.
• Vice President Michel Temer has taken over the government in
the interim. Yet with growing resentment between his PMDB and
Rousseff´s Workers Party, any reforms will be difficult to pass.
Market trends
another 800,000 m2 in
• With
the pipeline from 2016-2018, the
current trends of high vacancy and falling rents will persist.
However new production is expected to slow down as the market
returns toward equilibrium.
Production - 2015 (m²)
412,000
Net absorption – 2015 (m²)
206,000
Expected production – 2016 (m²)
370,000
Expected net absorption – 2016 (m²)
200,000
Class A rental range (USD/m²/mo.)
$11 - 48
Class AB/B+ rental range (USD/m²/mo.)
$10 - 44
Average purchase price range (USD/m²)
$1,300 – 5,900
450.000
400.000
350.000
Production
Forecast
40%
Absorption
35%
Vacancy
30%
300.000
25%
250.000
20%
200.000
15%
150.000
100.000
50.000
-
10%
5%
0%
Vacancy Rate
500.000
Rentable Area (m2)
• Historic levels of production continue to put strong downward
pressure on rents. Class A rents are down 5.5% from 2014 and
9.4% from 2013.
23,6%
Historic production, absorption, and vacancy
• Vacancy in São Paulo reached 23.6% in 2015 and is expected to
rise to 25% in 2016, a historic mark for the metropolis. The
submarkets that are driving the increase in vacancy are Alphaville,
Barra Funda, Bernini, Marignal, and Vila Olimpia.
• Net office absorption surpassed 200,000 m2 for the second
straight year as tenants are taking advantage of favorable market
conditions to expand and/or consolidate their operations.
4,493,000
JLL | Latin America | Office Market Overview | Mid year 2016 16
Brazil – Rio de Janeiro
• Brazil is currently experiencing one of the worst recessions in its
history, with the economy likely to contract by at least 4% in 2016.
• Inflation has moderated somewhat this year, though at around 9%
Y-o-Y in May, it is still well above the Central Bank´s target rate.
Interest rate cuts this year are unlikely.
• Amidst economic mismanagement and a ballooning corruption
scandal at Petrobras, the state-run oil company, the Brazilian
Congress and Senate have voted to impeach Dilma Rousseff. Yet
her Workers Party has fought back, accusing the opposition of a
coup and pointing to the fact that many politicians leading the
impeachment proceedings are themselves under investigation for
involvement in the Petrobras affair.
• Vice President Michel Temer has taken over the government in
the interim. Yet with growing resentment between his PMDB and
Rousseff´s Workers Party, any reforms will be difficult to pass.
Office market statistics
Total stock (m²)
Overall vacancy rate
Production - 2015 (m²)
Net absorption – 2015 (m²)
• Rio is preparing to host the 2016 Summer Olympics. This should
provide a huge jolt to the local economy and has already spurred
significant investment in infrastructure, tourism, and security.
16,000
Expected net absorption – 2016 (m²)
100,000
Class A rental range (USD/m²/mo.)
$18 - 55
Class AB/B+ rental range (USD/m²/mo.)
$18 - 72
Average purchase price range (USD/m²)
$2,200 – 8,900
Historic production, absorption, and vacancy
300.000
Rentable Area (m2)
• 2016 should see a continuation of falling rents and rising vacancy,
however absorption should recover due to favorable conditions for
tenants.
142,000
186,000
• Overall vacancy in Rio de Janeiro is approaching record levels at
24.2%. This is driven by low occupancy in submarkets such as
Barra de Tijuca, Centro, Orla, and Porto Maravilha.
• Rents decreased by 12% on average Y-o-Y. Rents fell hardest in
the Zona Sul, Orla, and Porto Maravilha submarkets.
24,3%
Expected production – 2016 (m²)
Market trends
• Net absorption in Rio was very low for the second straight year, as
several companies are downsizing and returning space. This
trend was particularly present in the Orla submarket.
1,950,000
Production
250.000
Absorption
200.000
Vacancy
150.000
100.000
Forecast
40%
35%
30%
25%
20%
15%
10%
50.000
-
5%
0%
Vacancy Rate
Macroeconomic overview
JLL | Latin America | Office Market Overview | Mid year 2016 17
Chile - Santiago
Macroeconomic overview
Office market statistics
• Strong consumer spending, a growing services sector, and a
recovering industrial sector have support the Chilean economy
through 2016. Mining has also recovered, as the deceleration of
the Chinese economy has not been as painful as was anticipated.
Total stock (m²)
3,115,000
Overall vacancy rate
• The Chilean Peso continues to slide against the US Dollar. This
has generated mild inflation and will raise government debt, yet
the economy should be buffered by the reserves accumulated in
the Stabilization Fund as well as a robust financial system.
9.9%
Production - 2015 (m²)
177,000
Net absorption – 2015 (m²)
162,000
Expected production – 2016 (m²)
170,000
Expected net absorption – 2016 (m²)
140,000
Class A rental range (USD/m²/mo.)
$19 – 24
Market trends
Class AB/B+ rental range (USD/m²/mo.)
$16 - 20
• Demand was strong in 2015 despite the ripple effects in the
extractives sector. Vacancy is just shy of 10%, its highest mark in
over a decade. With another 170,000 m2 in the pipeline for 2016,
vacancy is expected to reach 11% within another year.
Average purchase price range (USD/m²)
$3,300 – 4,400
• The Chilean congress is about to ratify the Trans-Pacific
Partnership, which would reduce barriers to trade in goods and
services and should boost trade with countries such as the US.
• The Santiago office market has grown steadily to the northeast
over the past decade and today is mostly contained in the Las
Condes submarket. This trend could continue over the next few
years as neighborhoods like Los Dominicos, Estoril, and La
Dehesa are becoming increasingly consolidated.
350.000
Rentable Area (m2)
• High vacancy is giving tenants more leverage and has pushed
rents down by 10% since 2014. As the Chilean Peso weakens
against the dollar, rents will look more attractive for multinational
tenants who do their accounting in USD.
400.000
300.000
250.000
200.000
150.000
100.000
50.000
-
Production
Absorption
Vacancy
Forecast
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Vacancy Rate
Historic production, absorption, and vacancy
• Considering the headwinds facing the Chilean economy and the
oversupply currently seen in the market, it is likely that office
production beyond 2015 will fall. Production in 2017 and 2018 is
not expected to exceed 100,000 m2.
JLL | Latin America | Office Market Overview | Mid year 2016 18
Colombia - Bogotá
Macroeconomic overview
Office market statistics
• The combined effect of falling exports and US monetary policy
tightening has reduced appetite for investments. This has put
significant pressure on the current account balance, causing the
peso to lose nearly half its value since 2014 and raising the cost of
imported products.
Total stock (m²)
2,054,000
Overall vacancy rate
11.4%
Production - 2015 (m²)
247,000
Net absorption – 2015 (m²)
122,000
Expected production – 2016 (m²)
331,000
• The recent El Niño weather phenomenon has left most of
Colombia in a severe draught, straining agricultural production
and hydroelectric power generation, and causing a sharp increase
in food and energy prices. Inflation ended the year at nearly 7%,
its highest rate in years.
Expected net absorption – 2016 (m²)
137,000
Class A rental range (USD/m²/mo.)
$20 - 25
Class AB/B+ rental range (USD/m²/mo.)
$15 - 22
• An agreement has been reached in principle between the
government and the FARC to end a 60-year civil war in 2016. It is
expected to be signed by the end of the year.
Average purchase price range (USD/m²)
$2,000 – 3,300
• Falling oil revenues have exposed fiscal and current account
deficits that the government is increasingly facing pressure to fill.
A tax reform is expected for later this year that should help
address these issues.
*Exchange rate fluctuations have made prices fall considerably in USD. For this report
JLL uses an exchange rate of 3,000 COP/USD. Rents are stated in COP locally.
Historic production, absorption, and vacancy
Market trends
• Demand was strong in 2015, driven by public sector flight to
quality and new entries in the private sector. Many companies are
taking advantage of the cheap rents in USD. These factors have
resulted in strong net absorption of 122,000 m2.
300.000
250.000
200.000
150.000
100.000
50.000
-
Production (m2)
Net Absorption (m2)
Vacancy (%)
30%
25%
20%
15%
10%
5%
0%
Vacancy Rate
• Rents have begun to fall in local currency due to oversupply.
However when stated in USD, rents have plummeted by 50%.
Class A buildings that were leasing at USD $35-40/m2/month a
year ago are now between $20-25/m2/month.
Forecast
350.000
Rentable Area (m2)
• The Bogotá market saw its second highest year for new supply in
2015 with 247,000 m2 of new completions. The boom will
continue at least through 2018, however forecasts indicate that
production will fall back to normal levels beyond that.
JLL | Latin America | Office Market Overview | Mid year 2016 19
Colombia - Medellin
Macroeconomic overview
Office market statistics
• The combined effect of falling exports and US monetary policy
tightening has reduced appetite for investments. This has put
significant pressure on the current account balance, causing the
peso to lose nearly half its value since 2014 and raising the cost of
imported products.
Total stock (m²)
626,000
Overall vacancy rate
7.9%
Production - 2015 (m²)
56,000
Net absorption – 2015 (m²)
29,000
Expected production – 2016 (m²)
98,000
• The recent El Niño weather phenomenon has left most of
Colombia in a severe draught, straining agricultural production
and hydroelectric power generation, and causing a sharp increase
in food and energy prices. Inflation ended the year at nearly 7%,
its highest rate in years.
Expected net absorption – 2016 (m²)
47,000
Class AB/B+ rental range (USD/m²/mo.)
$9 - 15
• An agreement has been reached in principle between the
government and the FARC to end a 60-year civil war in 2016. It is
expected to be signed by the end of the year.
Average purchase price range (USD/m²)
$1,400 – 2,500
• Falling oil revenues have exposed fiscal and current account
deficits that the government is increasingly facing pressure to fill.
A tax reform is expected for later this year that should help
address these issues.
Class A rental range (USD/m²/mo.)
*Exchange rate fluctuations have made prices fall considerably in USD. For this report
JLL uses an exchange rate of 3,000 COP/USD. Rents are stated in COP locally.
Change in Rents, COP vs. USD
• Vacancy rose from 3.9% in 2014 to 7.9% in 2015, mainly due to
the completion of One Plaza and Milla de Oro, two Class A+
buildings that added over 40,000 m2 to the market. Still, vacancy
in Medellin remains among the lowest in the region.
Average Rents (COP)
• New supply is growing strongly. 2016 will be a record year for
office production with 98,000 m2 to be delivered.
$70.000
$60.000
Class A - COP
Class AB - COP
Class A - USD
Class AB - USD
$35
$30
$50.000
$25
$40.000
$20
$30.000
$15
$20.000
$10
2008 2009 2010 2011 2012 2013 2014 2015 2016
Average Rents (USD)
Market trends
• The Medellin city government is ambitiously pushing several
initiatives to enhance the city´s competitiveness. These include
new zoning plans to incentivize mixed use vertical development
as well as infrastructure investments like Parques del Rio, a light
rail and bus rapid transit system, and a proposed tunnel road to
the airport.
$14 – 20
JLL | Latin America | Office Market Overview | Mid year 2016 20
Colombia - Cali
Macroeconomic overview
Office market statistics
• The combined effect of falling exports and US monetary policy
tightening has reduced appetite for investments. This has put
significant pressure on the current account balance, causing the
peso to lose nearly half its value since 2014 and raising the cost of
imported products.
Total stock (m²)
• Falling oil revenues have exposed fiscal and current account
deficits that the government is increasingly facing pressure to fill.
A tax reform is expected for later this year that should help
address these issues.
210,000
Overall vacancy rate
8.3%
Production - 2015 (m²)
3,800
Net absorption – 2015 (m²)
7,500
Expected production – 2016 (m²)
16,000
• The recent El Niño weather phenomenon has left most of
Colombia in a severe draught, straining agricultural production
and hydroelectric power generation, and causing a sharp increase
in food and energy prices. Inflation ended the year at nearly 7%,
its highest rate in years.
Expected net absorption – 2016 (m²)
12,000
Class AB/B+ rental range (USD/m²/mo.)
$8 – 15
• An agreement has been reached in principle between the
government and the FARC to end a 60-year civil war in 2016. It is
expected to be signed by the end of the year.
Average purchase price range (USD/m²)
$1,400 – 2,300
Class A rental range (USD/m²/mo.)
*Exchange rate fluctuations have made prices fall considerably in USD. For this report
JLL uses an exchange rate of 3,000 COP/USD. Rents are stated in COP locally.
Ownership Structure by Submarket
• 2015 was a quiet year for the market with very limited production
and limited net absorption. The next 12 months will be very telling
for the Cali market as the delivery of 3 Class A buildings will
gauge the level of demand.
100.000
90.000
80.000
70.000
60.000
50.000
40.000
30.000
20.000
10.000
-
Single User
Simplified
Strata Title
Vacancy
30%
25%
20%
15%
10%
5%
0%
Centro
Versalles
Ciudad Jardin
Other
Vacancy Rate
• The Cali market is oriented toward the extremes, with the vast
majority of companies operating in very small spaces and a small
number of companies who have headquarters in the Valle de
Cauca owning or leasing an entire building.
Rentable Area (m2)
Market trends
• Cali has great potential for growth owing to its educated populace,
large medical cluster, and access to the Pacific Ocean. However
2015 was a slow year for the economy as trade with Pacific
partners – mainly with China – took a large hit.
$15 – 20
JLL | Latin America | Office Market Overview | Mid year 2016 21
Colombia - Barranquilla (and Caribbean)
Macroeconomic overview
Office market statistics
• The combined effect of falling exports and US monetary policy
tightening has reduced appetite for investments. This has put
significant pressure on the current account balance, causing the
peso to lose nearly half its value since 2014 and raising the cost of
imported products.
• Falling oil revenues have exposed fiscal and current account
deficits that the government is increasingly facing pressure to fill.
A tax reform is expected for later this year that should help
address these issues.
Total stock (m²)
175,000
Overall vacancy rate
26.75%
Production - 2015 (m²)
44,000
Net absorption – 2015 (m²)
9,000
Expected production – 2016 (m²)
45,000
• The recent El Niño weather phenomenon has left most of
Colombia in a severe draught, straining agricultural production
and hydroelectric power generation, and causing a sharp increase
in food and energy prices. Inflation ended the year at nearly 7%,
its highest rate in years.
Expected net absorption – 2016 (m²)
21,000
Class AB/B+ rental range (USD/m²/mo.)
$8 – 15
• An agreement has been reached in principle between the
government and the FARC to end a 60-year civil war in 2016. It is
expected to be signed by the end of the year.
Average purchase price range (USD/m²)
$1,600 – 2,000
Class A rental range (USD/m²/mo.)
*Exchange rate fluctuations have made prices fall considerably in USD. For this report
JLL uses an exchange rate of 3,000 COP/USD. Rents are stated in COP locally.
Stock and Vacancy by Submarket
Market trends
• As a result the vacancy rate has shot up from 7.6% a year ago to
26.75% today. With another 100,000 m2 to be completed by
2018, JLL forecasts that vacancy in the Caribbean region could
reach 35% by 2017.
70.000
60.000
50.000
Production (m2)
Absorption (m2)
Vacancy Rate
40%
35%
30%
25%
40.000
20%
30.000
15%
20.000
10%
10.000
5%
-
0%
Vacancy Rate
• Thus far demand has been disappointing in this nascent market.
In 2015 44,000 m2 of new supply was completed but demand was
short of 10,000 m2.
Forecast
80.000
Rentable Area (m2)
• Colombia´s economic emergence has had a transformative
economic multiplier effect on the Caribbean region – anchored by
the port cities of Cartagena, Barranquilla, and Santa Marta. This
is reflected in a swell of interest in real estate that has over
100,000 m2 of Class A office space under construction.
$14 – 21
JLL | Latin America | Office Market Overview | Mid year 2016 22
Costa Rica – San José
Macroeconomic overview
Office market statistics
• The Costa Rican economy has accelerated in 2016. This has
been driven by expansionary monetary policy, continued US
economic growth which has boosted exports, increased foreign
investment in the service sector, and infrastructure spending –
specifically the Limon port terminal, several highway projects, and
an electric train for San José.
Total stock (m²)
1,035,000
Overall vacancy rate
16.3%
Production - 2015 (m²)
73,000
• Inflation, at 1%, was under the Central Bank´s target range. The
policy interest rate has been cut from 5.25% a year ago to 2.25%
to generate spending and put upward pressure on inflation.
Net absorption – 2015 (m²)
51,000
Expected production – 2016 (m²)
77,000
• President Luis Guillermo Solis is pushing a tax reform intended to
ease the nation´s fiscal debt burden, currently at 6% of GDP.
However a lack of support in congress is undermining the initiative
and led S&P to downgrade Costa Rica´s credit rating.
Expected net absorption – 2016 (m²)
56,000
Market trends
• San José is an important hub for manufacturing and business
process outsourcing (BPO) outsourcing. Accordingly, 40% of the
office market is concentrated in Free Trade Zones and 70% is
contained in enclosed business and/or industrial parks.
• Vacancy has continued to rise from 15% to 16.3% this year, and
should keep rising over the next two years as production will
increase.
• High production has put pressure on Class A landlords, forcing
them to lower their rents. In many parts of the city there is almost
no gap between Class A and Class AB rents.
$15 – 23
Class AB/B+ rental range (USD/m²/mo.)
$14 - 21
Average purchase price range (USD/m²)
$2,000 – 3,000
Historic production, absorption, and rents
$25
Forecast
$20
USD/m2/month
• 73,000 m2 of office space were delivered to the market, a
significant amount for San José. Demand was fairly strong at
51,000 m2, a considerable increase over the 38,000 m2 of demand
seen last year.
Class A rental range (USD/m²/mo.)
$15
$10
Class A (USD/m2/month)
$5
Class AB (USD/m2/month)
$-
JLL | Latin America | Office Market Overview | Mid year 2016 23
Ecuador - Quito
Macroeconomic overview
Office market statistics
• A devastating earthquake near the city of Manta as well as falling
oil prices have combined to sharply derail the Ecuadorean
economy in 2016. The government has raised taxes to
supplement the USD $1 billion in donations it has received for the
reconstruction of the affected areas.
Total stock (m²)
Overall vacancy rate
• Plummeting oil revenues have left Ecuador with a shortage of
dollars. Foreign exchange reserves barely cover two months of
imports. However higher interest rates and cautious monetary
policy have induced households to build up their bank deposits
this year.
• To keep the fiscal deficit under control the government is selling
assets such as oil inventories, imposing rising tariffs on imported
products, raising taxes, and cutting public investment. The deficit
is at a 20-year high and is expected to exceed 6% of GDP in
2016.
• Ecuador issued its first government bonds since 2008 last year,
raising $2 billion. However borrowing costs remain very high.
• Top properties in Quito are commanding USD $23/m2/month while
Class AB properties are charging between USD $10-18/m2/month.
Since Ecuador uses the US Dollar as its currency, there has not
been a strong downturn in rents like in other countries.
71,000
Net absorption – 2015 (m²)
83,000
Expected production – 2016 (m²)
76,000
Expected net absorption – 2016 (m²)
70,000
Class A rental range (USD/m²/mo.)
$16 – 23
Class AB/B+ rental range (USD/m²/mo.)
$10 – 18
Average purchase price range (USD/m²)
$1,200 – 2,300
400.000
Stock
Vacancy
20%
15%
300.000
10%
200.000
5%
100.000
-
0%
Amazonas Amazonas 12 de Republica Republica Cumbaya
Norte
Sur
Octubre El Salvador
Vacancy Rate
• Another 250,000 m2 of space will be completed by the end of
2016. This will push vacancy up and put downward pressure on
rents.
Production - 2015 (m²)
500.000
Rentable Area (m2)
• Although vacancy increased from 2.4% in 2014 to 3.2% in 2015,
Quito still demonstrates the lowest vacancy rate in the region.
3.2%
Stock and vacancy by submarket
Market trends
• Quito is one of the few markets where demand outpaced supply in
2015; the 71,000 m2 of new supply were met with 83,000 m2 in net
absorption.
1,342,000
JLL | Latin America | Office Market Overview | Mid year 2016 24
Ecuador - Guayaquil
Macroeconomic overview
Office market statistics
• A devastating earthquake near the city of Manta as well as falling
oil prices have combined to sharply derail the Ecuadorean
economy in 2016. The government has raised taxes to
supplement the USD $1 billion in donations it has received for the
reconstruction of the affected areas.
Total stock (m²)
Overall vacancy rate
• Plummeting oil revenues have left Ecuador with a shortage of
dollars. Foreign exchange reserves barely cover two months of
imports. However higher interest rates and cautious monetary
policy have induced households to build up their bank deposits
this year.
• To keep the fiscal deficit under control the government is selling
assets such as oil inventories, imposing rising tariffs on imported
products, raising taxes, and cutting public investment. The deficit
is at a 20-year high and is expected to exceed 6% of GDP in
2016.
• Ecuador issued its first government bonds since 2008 last year,
raising $2 billion. However borrowing costs remain very high.
• The most consolidated submarket is Kennedy, where nearly half
the market is located. Rents in Kennedy are the highest in the
city, ranging from $17-20/m2/month.
Production - 2015 (m²)
32,000
Net absorption – 2015 (m²)
37,000
Expected production – 2016 (m²)
34,000
Expected net absorption – 2016 (m²)
28,000
Class A rental range (USD/m²/mo.)
$15 – 20
Class AB/B+ rental range (USD/m²/mo.)
$10-$17
Average purchase price range (USD/m²)
$3,300 – 4,400
500.000
450.000
400.000
350.000
300.000
250.000
200.000
150.000
100.000
50.000
-
Stock
Vacancy
20%
15%
10%
5%
0%
Kennedy
Centro
Urdesa/Ceibos
Samborondon
Vacancy Rate
• Vacancy is currently at 6.4%, and is highest in the Samborondon
submarket at 8.3%.
Rentable Area (m2)
• New production will stay steady over the next two years with
approximately 30,000 m2 of area expected to be completed in
each of the next two years.
6.4%
Stock and vacancy by submarket
Market trends
• Guayaquil is another of the few markets where demand outpaced
supply in 2015; 32,000 m2 in new production were met with 37,000
m2 of demand.
518,000
JLL | Latin America | Office Market Overview | Mid year 2016 24
Guatemala – Guatemala City
Macroeconomic overview
Office market statistics
• The Guatemalan economy has been stable over the past few
years, rarely seeing the highs or lows of neighbors like Panama.
The economy maintained a 4% growth rate in 2015, roughly equal
to one year ago.
Total stock (m²)
510,000
Overall vacancy rate
6.0%
• Consumer spending and investment are expected to grow as a
portion of GDP in the medium-term.
Production - 2015 (m²)
18,000
• In 2015 Guatemala was rocked by the La Linea scandal, one of
the largest cases of corruption yet seen in the Central American
nation. In this affair top government officials were taking
kickbacks from importers via the customs authority in exchange
for preferential access for their goods. The scandal lead to the
ouster of the president and vice president.
Net absorption – 2015 (m²)
15,000
Expected production – 2016 (m²)
16,000
Expected net absorption – 2016 (m²)
10,000
Class A rental range (USD/m²/mo.)
$9 – 11
• The La Linea affair had deep political ramifications. In the election
of September 2015, Guatemalans voted for comedian Jimmy
Morales, a man with no prior political experience. The election
was a clear show of discontent with the nation´s political
establishment.
Class AB/B+ rental range (USD/m²/mo.)
$8 – 10
Average purchase price range (USD/m²)
$1,000 – 1,500
• In 2016 net absorption is expected to decrease, highlighted by the
expected closure of Citibank´s operations in Guatemala.
However, the recovery in the US, Guatemala´s top export market,
should boost activity in the market.
• Approximately 50,000 m2 of office will be completed between
2016-2017.
Rentable Area (m2)
• Guatemala City boasts the lowest rents and sale prices for any
major city in the western hemisphere. This is due to low demand
and the predominance of low-cost operations such as call centers
and business process outsourcing. Class A buildings invariably
lease between $10-11/m2/month.
200.000
180.000
160.000
140.000
120.000
100.000
80.000
60.000
40.000
20.000
-
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Stock - Class A
Stock - Class AB
Vacancy
Americas
Proceres
Reforma
Others
Vacancy Rate
Stock distribution by submarket
Market trends
JLL | Latin America | Office Market Overview | Mid year 2016 25
Mexico – Mexico City
Macroeconomic overview
Office market statistics
• The Mexican economy was somewhat sluggish in 2015,
hampered by slowing manufacturing activity. Since Mexican
manufacturers produce so many supply chain goods for US
companies, the strong dollar has hurt them because it has
dampened demand for US exports, which are now more
expensive around the world.
Total stock (m²)
Overall vacancy rate
5,624,000
12%
Production - 2015 (m²)
675,000
• While the export sector has struggled, indicators on the domestic
front remain positive. Employment, real wages, and credit access
are all on the rise, and consumer confidence remains resilient.
Net absorption – 2015 (m²)
470,000
Expected production – 2016 (m²)
476,000
• The Mexican Peso is among the global currencies caught up in
the recent turmoil of the financial markets. The currency saw a
14% drop in 2015 and continued to fall throughout the first half of
2016. This has created inflationary pressures as imports are now
more costly. In response Banxico, the Mexican Central Bank,
raised the policy interest rate 50 bp to 3.75%, and it is likely to
announce additional hikes in tandem with the US interest rate.
Expected net absorption – 2016 (m²)
344,000
Class A rental range (USD/m²/mo.)
$22 – 28
Class AB/B+ rental range (USD/m²/mo.)
$18 - 21
Average purchase price range (USD/m²)
$2,500 – 6,600
*Exchange rate fluctuations have made prices fall considerably in USD. For this report
JLL uses an exchange rate of 17 MXN/USD.
Market trends
Vacancy and absorption by submarket
• Vacancy has risen Y-o-Y from 11% in 2014 to 12% in 2015.
• Rents saw increases in the submarkets located to the south and
west of the city. On the whole it is likely that they will show a
downward trend due to the immense amount of supply in the
pipeline.
• Many landlords have begun quoting rents in Mexican Pesos due
to exchange rate volatily.
100.000
Rentable Area (m2)
• Over 1,000,000 m2 will be delivered in Mexico City from 2016 –
2017.
120.000
Availability
Net Demand
Vacancy Rate
35%
30%
80.000
25%
60.000
20%
40.000
15%
20.000
10%
-20.000
5%
0%
Vacancy Rate
• 2015 saw record absorption in Mexico City as over 470,000 m2
were leased, including 135,000 m2 for Bancomer/BBVA´s new
headquarters. In fact one third of net absorption in all of Latin
America for the year happened in Mexico City.
JLL | Latin America | Office Market Overview | Mid year 2016 26
Mexico – Monterrey
Macroeconomic overview
Office market statistics
• The Mexican economy was somewhat sluggish in 2015,
hampered by slowing manufacturing activity. Since Mexican
manufacturers produce so many supply chain goods for US
companies, the strong dollar has hurt them because it has
dampened demand for US exports, which are now more
expensive around the world.
Total stock (m²)
1,075,000
Overall vacancy rate
17,9%
Production - 2015 (m²)
47,000
• While the export sector has struggled, indicators on the domestic
front remain positive. Employment, real wages, and credit access
are all on the rise, and consumer confidence remains resilient.
Net absorption – 2015 (m²)
68,000
• The Mexican Peso is among the global currencies caught up in
the recent turmoil of the financial markets. The currency saw a
14% drop in 2015 and continued to fall throughout the first half of
2016. This has created inflationary pressures as imports are now
more costly. In response Banxico, the Mexican Central Bank,
raised the policy interest rate 50 bp to 3.75%, and it is likely to
announce additional hikes in tandem with the US interest rate.
Expected net absorption – 2016 (m²)
Expected production – 2016 (m²)
143,000
75,000
Class A rental range (USD/m²/mo.)
$18 – 23
Class AB/B+ rental range (USD/m²/mo.)
$12 - 17
Average purchase price range (USD/m²)
$2,000 – 3,500
*Exchange rate fluctuations have made prices fall considerably in USD. For this report
JLL uses an exchange rate of 17 MXN/USD.
Market trends
• Monterrey is one of the few markets in Latin America that has
experienced falling vacancy over the past few years. This comes
as a consequence of Mexico´s – and particularly northern
Mexico´s – strong trade ties with the United States and therefore
its correlation to the US recovery. As Monterrey is Mexico´s top
manufacturing city, its real estate market has gained momentum
over the past few years.
350.000
Rentable Area (m2)
• Many landlords have begun quoting rents in Mexican Pesos due
to exchange rate volatility. When stated in local currency, rents
have been stable and haven´t changed much since 2014.
400.000
300.000
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Stock
Net Absorption
Vacancy (%)
250.000
200.000
150.000
100.000
50.000
Country
Centro/ Santa Maria/
Obispado San Jeronimo
Valle
Valle Oriente
Vacancy Rate
Stock, vacancy, and rents by submarket
• Net absorption increased from 42,000 m2 in 2014 to 68,000 m2 in
2015. Demand has been driven by a flight to quality trend as
tenants take advantage of favorable market conditions.
JLL | Latin America | Office Market Overview | Mid year 2016 27
Mexico – Guadalajara
Macroeconomic overview
Office market statistics
• The Mexican economy was somewhat sluggish in 2015,
hampered by slowing manufacturing activity. Since Mexican
manufacturers produce so many supply chain goods for US
companies, the strong dollar has hurt them because it has
dampened demand for US exports, which are now more
expensive around the world.
Total stock (m²)
180,000
Overall vacancy rate
9.3%
Production - 2015 (m²)
2,000
• While the export sector has struggled, indicators on the domestic
front remain positive. Employment, real wages, and credit access
are all on the rise, and consumer confidence remains resilient.
Net absorption – 2015 (m²)
12,000
Expected production – 2016 (m²)
93,000
• The Mexican Peso is among the global currencies caught up in
the recent turmoil of the financial markets. The currency saw a
14% drop in 2015 and continued to fall throughout the first half of
2016. This has created inflationary pressures as imports are now
more costly. In response Banxico, the Mexican Central Bank,
raised the policy interest rate 50 bp to 3.75%, and it is likely to
announce additional hikes in tandem with the US interest rate.
Expected net absorption – 2016 (m²)
70,000
Class A rental range (USD/m²/mo.)
$19 – 26
Class AB/B+ rental range (USD/m²/mo.)
$15 - 20
Average purchase price range (USD/m²)
$2,500 – 3,500
*Exchange rate fluctuations have made prices fall considerably in USD. For this report
JLL uses an exchange rate of 17 MXN/USD.
Market trends
Stock, production, and vacancy by submarket
140.000
120.000
Under Construction
• Approximately 310,000 m2 are expected to be delivered from
2016-2018, nearly tripling the size of the market.
100.000
Planned
• The vast majority of the office market is contained in Puerto de
Hierro, a large master-planned neighborhood in the northeast of
the city. This submarket contains over half of the existing stock
and over half the new construction in the city.
80.000
50%
Stock
45%
40%
35%
Vacancy Rate
30%
25%
60.000
20%
15%
40.000
10%
20.000
5%
-
0%
Americas
Lopez Mateos Puerta de Hierro
Vallarta
Vacancy Rate
• Rents have been stable through 2015. As the Guadalajara market
is relatively tight, there has been little pressure on landlords to
lower rents. This should change in the context of high future
production.
Rentable Area (m2)
• With vacancy relatively low in Guadalajara, companies looking for
large spaces will most likely need to pre-lease in a building under
construction. 25% of the area under construction has already
been reserved.
JLL | Latin America | Office Market Overview | Mid year 2016 28
Panama – Panama City
Macroeconomic overview
Office market statistics
• Panama´s economy remains the fastest growing in Latin America,
though it has slowed since 2014 as weakened global trade has
reduced canal fees and warehousing activity along the canal.
Total stock (m²)
Overall vacancy rate
• Several large infrastructure projects are expected to finish in
2016, including the Panama Canal expansion and the Tocumen
Airport expansion. While many see these projects as necessary
to improve the country´s productivity, it has significantly increased
government debt.
• Beyond 2016 the supply pipeline will dry up almost completely.
This is an indication that investors are growing weary of high
vacancy and lagging demand.
• Rents have fallen over the past year, especially in Class A
buildings in Obarrio where absorption has been very low.
196,000
Net absorption – 2015 (m²)
80,000
Expected production – 2016 (m²)
168,000
Expected net absorption – 2016 (m²)
78,000
Class A rental range (USD/m²/mo.)
$15 - 28
Class AB/B+ rental range (USD/m²/mo.)
$16 - 23
Average purchase price range (USD/m²)
$2,100 – 3,200
Rentable Area (m2)
300.000
250.000
Production (m2)
Absorption (m2)
Vacancy Rate (%)
200.000
150.000
100.000
50.000
-
Forecast
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Vacancy Rate
Historic production, absorption, and vacancy
Market trends
• The gap between new supply and demand pushed vacancy up to
45%, one of the highest vacancy rates in the world. This could
increase even further in 2016 as another 168,000 m2 are
expected to be completed.
45.3%
Production - 2015 (m²)
• Panama is fighting the OECD´s push for universal adoption of the
Common Reporting Standards (CRS), which would require host
nations to obtain all company information from their financial
institutions and share it with other nations. Panama earns
considerable foreign investment by being a financial “safe haven,”
thus the CRS could undermine its status as a global financial hub.
The recent scandal surrounding the Panama Papers has led
nations around the world to further pressure Panama to adapting
the CRS, and this could have important long-term implications.
• Production remained high in 2015 with approximately 196,000 m2
of space delivered to the market. However demand was again
weaker than expected at 78,000 m2.
1,268,000
JLL | Latin America | Office Market Overview | Mid year 2016 29
Peru - Lima
Macroeconomic overview
Office market statistics
• The Peruvian economy performed above expectations in 2015 on
the backs of consumer spending and expansionary fiscal policy. It
remains one of the strongest performers in the region.
Total stock (m²)
Overall vacancy rate
• Inflation has increased slightly as a result of a weaker exchange
rate, rising import prices, and low agricultural output caused by
the El Niño weather phenomenon. The Central Bank is raising its
policy rate aggressively – now at 4.25% - to counteract inflation.
• The Humala administration passed a $1.6 billion countercyclical
stimulus package in 2015. The bill contains a number of
measures aimed at boosting consumer spending including
temporary tax credits, gas subsidies, and more flexible pensions.
• Pedro Pablo Kuczynski – a centrist economist – pulled off a slim
and shocking win over frontrunner Keiko Fujimori to become
Peru´s next president. As his party controls only 20 seats in
Congress, he will face an uphill battle and will have to form many
alliances to get things done.
• Current market conditions are triggering a sharp fall in rents
across the city. Average rents increased steadily from 2009 to
2013, however over the past 2 years average rents have
diminished by nearly 20%.
Production - 2015 (m²)
287,000
Net absorption – 2015 (m²)
120,000
Expected production – 2016 (m²)
245,000
Expected net absorption – 2016 (m²)
100,000
Class A rental range (USD/m²/mo.)*
$21-$25
Class AB/B+ rental range (USD/m²/mo.)*
$18-$24
Average purchase price range (USD/m²)
2,000 – 3,000
Historic production, absorption, and vacancy
300.000
250.000
200.000
150.000
Production (m2)
Absorption (m2)
Vacancy Rate
40%
Forecast
35%
30%
25%
20%
15%
100.000
10%
50.000
5%
-
0%
Vacancy Rate
350.000
Rentable Area (m2)
• The considerable gap between supply and demand caused
vacancy to shoot up from 4.5% in 2014 to 14.8% at the end of
2015. This upward trajectory is likely to continue through 2017 as
another 450,000 m2 will be completed.
14.8%
*These rents include parking fees, which are quoted separately but are an obligatory
cost for users, adding about USD $4/m2/month in monthly rent.
Market trends
• Lima experienced a record year of supply in 2015 as 287,000 m2
of office space were delivered to the market. Considering the
adverse conditions facing the export sector, demand was robust
with approximately 120,000 m2 of net absorption.
1,485,000
JLL | Latin America | Office Market Overview | Mid year 2016 30
Puerto Rico – San Juan
Macroeconomic overview
Office market statistics
• Puerto Rico will see yet another year of economic contraction in
2016. The island's decade-long recession is driven by high
operational costs, the expiration of an export tax break, and a
crippling brain drain that has resulted from high unemployment.
Total stock (m²)
Overall vacancy rate
• Public debt has grown to over $70 billion, equal to 70% of GDP.
Puerto Rico spends an estimated 35% of its annual budget on
servicing its debt.
-12,000
Expected production – 2016 (m²)
0
Expected net absorption – 2016 (m²)
-5,000
Class A rental range (USD/m²/mo.)
$15 – 21
Class AB/B+ rental range (USD/m²/mo.)
$13 - 20
Average purchase price range (USD/m²)
$1,600 – 2,800
*Rents in San Juan are typically quoted in ft2, but are stated in m2 in this report for
consistency and comparative purposes.
Market trends
• San Juan’s two most important office clusters are Hato Rey which contains about 44% of the office stock - and Guaynabo, a
newer submarket that offers larger floor plates, more parking, and
less traffic congestion.
• With some Class A properties maintaining relatively high
occupancy, investors are looking to take advantage of low asset
prices to acquire properties that can provide a solid yield.
0
Net absorption – 2015 (m²)
• A recent Zika outbreak is testing the government´s overstretched
and underfunded health infrastructure, with over 700 confirmed
cases so far this year.
Historic Production, Absorption, and Vacancy
Forecast
Forecast
20.000
25%
20%
10.000
-
15%
(10.000)
10%
(20.000)
(30.000)
(40.000)
(50.000)
Production (m2)
Absorption (m2)
Vacancy
5%
0%
Vacancy Rate
30.000
Rentable Area (m2)
• The market continues to be tenant-favorable. Investors, users,
and corporate clients are taking advantage, using sub-leases and
early contract re-negotiations.
21.5%
Production - 2015 (m²)
• After a long-anticipated default on its debts in May, the US
government finally stepped in to help provide a way forward. The
proposed solution calls for a seven-person board that will make
decisions about privatizing public companies and restructuring
debt, with veto power over the island´s government.
• Vacancy is lowest among Class A buildings (around 11%) and
higher for Class B (19%) and Class C (30%). Class A buildings in
Hato Rey have remained steady assets throughout the recession.
768,000
JLL | Latin America | Office Market Overview | Mid year 2016 31
Uruguay - Montevideo
Macroeconomic overview
Office market statistics
• Weak external demand continues to plague Uruguay, as its
largest trading partners – Brazil and Argentina – remain mired in
recession. Lower export revenues and falling commodity prices
caused the fiscal deficit to rise to 2.5% of GDP in 2015.
Total stock (m²)
Overall vacancy rate
• Uruguay issued over USD $1.7 billion on the international bond
market, which will give it flexibility to finance the budget deficit.
Production - 2015 (m²)
• Inflation has continued to increase recently (10.6% Y-o-Y in
March), driven by the depreciation of the peso and the high
degree of wage indexation. However it should stabilize in the
short-term.
Net absorption – 2015 (m²)
Expected production – 2016 (m²)
Expected net absorption – 2016 (m²)
• The five year budget proposed by President Vasquez includes
USD $12.3 billion to be spent on new infrastructure projects, as
well as increased social spending and tax reforms.
• The government has been awarding more concessions to foreign
entities in an effort to diversify the country’s export mix. These
investments include French-funded wind farms, Chinese-funded
port and rail projects, and permits for large private mines.
• The vacancy rate has fallen to 5% from 7.4% a year ago.
5,400
0
7,000
Class AB/B+ rental range (USD/m²/mo.)
$21 - 27
Average purchase price range (USD/m²)
N/A
350.000
300.000
Rentable Area (m2)
0
$29 - 35
Market trends
• Prime rents have remained steady over the past 24 months
without much change.
5%
Class A rental range (USD/m²/mo.)
Stock evolution, 2002-2015
• The Montevideo market continues to be very quiet. There was no
production in 2015, nor is there any in the immediate horizon.
There are, however, a few projects that are waiting for a
commitment from a tenant to begin construction.
291,000
250.000
200.000
150.000
100.000
50.000
0
Class A
Class B+
Free Trade Zone
JLL | Latin America | Office Market Overview | Mid year 2016 32
Venezuela - Caracas
Office market statistics
• Venezuela is projected to have the worst performing economy in
the world in 2016, with analysts estimating an economic
contraction of over 7%.
Total stock (m²)
• An electricity shortage – precipitated by the El Niño phenomenon
which has lowered reserves at hydroelectric dams to worrying
levels – has taken a huge toll on the economy this year. The
government has responded by mandating a 4 day workweek for
the public, and a 2 day workweek for government employees.
Production - 2015 (m²)
18,000
Net absorption – 2015 (m²)
11,000
Expected production – 2016 (m²)
48,000
• There is a fear among investors that Venezuela will default on its
debt this year. With oil revenues so low and USD $10 billion in
debt payments due in 2016, the government will have to choose
between a default and printing money and sparking hyperinflation.
Expected net absorption – 2016 (m²)
35,000
Market trends
• Only 18,000 m2 of office space in 2 buildings were delivered to the
market. 2016 will be far busier with long-anticipated projects
Paseo La Castellana and Centro Empresarial Esmeralda nearing
completion.
• Rents in Caracas are stated in local currency but are driven
typically by the parallel exchange rate rather than the official rate.
Since most foreign companies must use the official rate for
accounting, they are seeing rents grow exponentially.
• Consequently, companies are preferring to purchase real estate
than keep their profits in the volatile banking system and deal with
the ambiguity of the rental market. In 2015 absorption in Caracas
was dominated by property sales.
Overall vacancy rate
Class A rental range, Official FX (USD/m²/mo.)
Class AB/B+ rental range, Official FX (USD/m²/mo.)
4.5%
$1,000 – 3,000
$400 – 1,500
Class A rental range, Parallel FX (USD/m²/mo.)
$29 – 35
Class AB/B+ rental range, Parallel FX (USD/m²/mo.)
$20 – 32
Average purchase price range, Parallel FX (USD/m²)
$4,500 - 6,500
Average
range,
Parallel FXRates
(USD/m²)
Price ofpurchase
Crudeprice
Oil and
Exchange
$3,000-$6,500
Price of Crude: USD per barrel
• The Socialist Party lost a critical election in November 2015, as
the opposition swept into power by winning just under 2/3 of the
seats in the National Assembly. The opposition has sworn to put
pressure on President Maduro to bring about more moderate
policies, though there is no guarantee he will acquiesce.
1,135,000
200
180
160
140
120
100
80
60
40
20
0
Price of Crude Oil (USD per barrel)
1400
Official Exchange Rate
1200
Parallel Exchange Rate
1000
800
600
400
200
0
VEF / USD
Macroeconomic overview
JLL | Latin America | Office Market Overview | Mid year 2016 33
Appendix:
Comparison of tenant leasing practices
Argentina
Brazil
Chile
Colombia
Unit Of Measurement
Square meters
Square meters
Square meters
Square meters
Rent Units
USD/m²/month
R$/m²/month (Brazilian Real)
Unidades de Fomento (UF), a
quasi-currency adjusted daily
according to the local CPI. For
more information visit
www.bcentral.cl
COP/m²/month (Colombian
Pesos)
Typical Lease Term
3-5 Years
5 Years
3-5 Years
5 years
Frequency of Rent Payment
Monthly
Monthly
Monthly
Monthly
Deposit/Guarantee
Case-by-case (typically 2-3
months depending on tenant)
Bank guarantee / guarantor /
secure bail
Case-by-case (typically 1-3
months’ rent)
Insurance policy typically
requested
Statutory Right to Renew
No (unless an option to renew
is agreed at outset and
specified in lease)
After 5 years per Brazilian law.
No (unless an option to renew is
agreed at the outset and
specified in the lease)
Yes; length of renewal term
typically specified in lease
Basis of Rent Increases or
Rent Review
Case-by-case, explicit
indexation by CPI is prohibited
by law.
Annual increase of CPI. After 3
years or upon renewal, the
parties gain the right of rent
review, to bring it back to market
rates
In UF, indexed daily
Annual increases of CPI + (0% 3%)
Rent Free Period
1-3 Months
Case-by-case, often 1-3 months
Case-by-case, often 1-3 months
1-3 Months
Car Parking
City: 1 per 100 m²
Province: 1 per 60 m²
A & AB Buildings - 1:35 m²
UF 3-4.5/unit/month (US $140210)
1 per 50 m²
Service Charges- Mgmt.
Fees
Additional to rental charge and
payable monthly in advance
Additional to the rental charge
and payable monthly in advance
Additional to the rental charge
and payable monthly in advance
Additional to rental charge,
payable monthly
Service Charges- Common
Areas
Payable by landlord (via tenant
service charge)
Additional to the rental charge
and payable monthly in advance
Payable by landlord (via tenant
service charge)
Payable by landlord (via tenant
service charge)
Service Charges- Building
Insurance
Payable by landlord
Payable by landlord (via tenant
service charge)
Payable by landlord (via tenant
service charge)
Payable by landlord
Sub-letting & Assignment
Normally yes (subject to
landlord approval)
Case by case
Normally yes (subject to landlord
approval)
Normally yes (subject to LL
approval)
Early Termination
After 6 months, 1.5 months of
rent penalty; After 1 year, 1
months of rent penalty
Normally tenant pays 3 month of
rent penalty, reduced in
proportion to the elapsed time of
the contract.
Non typically in this market
however they can negotiated.
Termination after year 3 of the
term with a penalty of 6 or 12
months´ rent is not uncommon.
Tenant is responsible for entirety
of contract unless otherwise
stipulated in contract.
Termination after year 3 with a 6
month rent penalty is typical.
Tenant Reinstatement
Responsibilities
Original condition, allowing for
normal wear and tear
Original condition or case by
case
Original condition
Original condition, allowing for
normal wear and tear
34
Appendix:
Comparison of tenant leasing practices
Costa Rica
Ecuador
Mexico
Panama
Unit Of Measurement
Square meters
Square meters
Square meters
Square meters
Rent Units
USD/m²/month
USD/m²/month
USD/m²/month
USD/m²/month
Typical Lease Term
3-5 Years
3-5 years
3-5 Years
3-5 Years
Frequency of Rent Payment
Monthly
Monthly
Monthly
Monthly
Deposit/Guarantee
Case-by-case, insurance policy
covering the contract is typical
Case-by-case (typically 2-3 months)
Typical deposit is two months rent
Not customary to have insurance
covering contract.
Case-by-case, insurance policy
covering the contract is typical
Statutory Right to Renew
No (unless an option to renew is
agreed at the outset and specified
in the lease)
No (unless option to renew is
agreed at outset and specified in
lease)
No
No (unless an option to renew is
agreed at the outset and specified in
the lease)
Basis of Rent Increases or
Rent Review
Case-by-case, though typically
some indexed percentage of CPI
CPI + (0% - 3%)
US Consumer Price Index, unless
rent quoted in Pesos, then Mexican
Consumer Price Index
Case-by-case, though typically
some indexed percentage of CPI
Rent Free Period
Usually only the time for the build
out (about 2 months)
1-3 Months
Case-by-case
Case-by-case, typically 1-3 months
Car Parking
1 per 25-50m², depending on
submarket
1 per 50 m²
1 per 30 m²
1 per 55 m², though newer buildings
offer more parking
Service Charges- Mgmt.
Fees
Additional to the rental charge and
payable monthly in advance
Additional to rental charge, payable
monthly
Tenant responsible, additional to the
rental charge and payable monthly
in advance
Fixed rate base on pro-rata share
Reconciled annually
Additional to the rental charge and
payable monthly in advance
Service Charges- Common
Areas
Payable by landlord (via tenant
service charge)
Payable by landlord (via tenant
service charge)
Payable by landlord (via tenant
service charge)
Payable by landlord (via tenant
service charge)
Service Charges- Building
Insurance
Payable by landlord
Payable by landlord
Payable by landlord (via tenant
service charge)
Payable by landlord
Sub-letting & Assignment
Normally yes (subject to landlord
approval)
Normally yes (subject to LL
approval)
Not customary and always subject
to Landlord approval for both
subleasing and assignment
Normally yes (subject to landlord
approval)
Early Termination
Legally tenants can exit after the
first year without penalty. To avoid
this LL can demand fully bondable
lease agreements.
Tenant is responsible for entirety of
contract unless otherwise stipulated
in contract
Negotiable (with termination fees)
Unless otherwise stipulated in the
rental contract, tenant is responsible
for paying entirety of contractual
obligation.
Tenant Reinstatement
Responsibilities
Original condition, allowing for
normal wear and tear
Original condition, allowing for
normal wear and tear
Original condition, allowing for
normal wear and tear
Original condition, allowing for
normal wear and tear
35
Appendix:
Comparison of tenant leasing practices
Peru
Puerto Rico
Uruguay
Venezuela
Unit Of Measurement
Square meter
Square feet
Square meters
Square meter
Rent Units
USD/m²/month
USD/ft2/month
USD/m²/month
VEF/m²/month (Venezuelan
Bolivares)
Typical Lease Term
3-5 Years
5-15 Years
5 Years
Variable
Frequency of Rent Payment
Monthly
Monthly
Monthly
Monthly
Deposit/Guarantee
Case-by-case, usually 2 months
rent are required
Case-by-case, though it is typical
Case-by-case, typically 6 to 12
months backed by bank guarantee
or cash deposit (depending on
tenant)
Case-by-case, insurance policy
covering the contract is typical
Statutory Right to Renew
No (unless an option to renew is
agreed at the outset and specified
in the lease)
No (unless an option to renew is
agreed at the outset and specified in
the lease)
No (unless an option to renew is
agreed at outset and specified in
lease)
Yes, renewal term depends on
previous tenure
Basis of Rent Increases or
Rent Review
Case-by-case, though typically
some indexed percentage of CPI
Case-by-case, though typically
some indexed percentage of CPI
Case-by-case, generally adjusted
using Consumer Price Index
Case-by-case, though often indexed
as some percentage of CPI
Rent Free Period
Case-by-case, typically 1-3
months. While this often occurs, it
is not standardized in Lima and is
usually dependent on tenant
improvement allowances provided.
Case-by-case, typically 1-6 months.
While this often occurs, it is not
standardized in Lima and is usually
dependent on tenant improvement
allowances provided.
Case-by-case
Typically 1-3 months for the buildout; 2 months is most common
Car Parking
US $150-200/space/month
depending on submarket
Paid separately; typically $80/month
for surface lots and $100/month for
covered space
Included in rent if building has
parking spaces, additional contract
is necessary otherwise
1 space per 20-35 m²
Service Charges- Mgmt.
Fees
Additional to the rental charge and
payable monthly in advance
Additional to the rental charge and
payable monthly in advance
Additional to the rental charge and
payable monthly in advance
Additional to the rental charge and
payable monthly in advance
Service Charges- Common
Areas
Payable by landlord (via tenant
service charge)
Payable by landlord (via tenant
service charge)
Payable by landlord (via tenant
service charge)
Payable by landlord (via tenant
service charge)
Service Charges- Building
Insurance
Payable by landlord
Payable by landlord (via tenant
service charge)
Payable by landlord (via tenant
service charge)
Payable by landlord
Sub-letting & Assignment
Normally yes (subject to landlord
approval)
Normally yes (subject to landlord
approval)
Normally yes (subject to landlord
approval)
Normally yes (subject to landlord
approval)
Early Termination
Case-by-case charming
Unless otherwise stipulated in the
rental contract, tenant is responsible
for paying entirety of contractual
obligation.
Case-by-case
Legally tenants can exit after the
first year without penalty. To avoid
this, LL can demand fully bondable
lease agreements.
Tenant Reinstatement
Responsibilities
Original condition, allowing for
normal wear and tear
Original condition, allowing for
normal wear and tear
Original condition, allowing for
normal wear and tear
Original condition, allowing for
normal wear and tear
For more information, including detailed city market reports:
Latin America: Northern Cone, Central America, Caribbean
Scott Figler – Senior Consultant
[email protected]
http://latinamerica.am.joneslanglasalle.com
Latin America: Southern Cone
Martin Potito – Associate Director, Latin America
[email protected]
http://latinamerica.am.joneslanglasalle.com
Brazil
Ricardo Hirata - Head of Research, Brazil
[email protected]
http://www.joneslanglasalle.com.br
Mexico
Jorge Velasco – Market Research Manager, Mexico
[email protected]
http://www.joneslanglasalle.com.mx
About Jones Lang LaSalle
JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased
value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0
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its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million
square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle
Investment Management, has $56.4 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones
Lang LaSalle Incorporated. For further information, visit www.jll.com.
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