Office Market Overview Latin America | End-year 2013
Despite headwinds, a growing middle class and high consumer confidence are contributing to a generally positive outlook in Latin America. Over 2 million m2 in new supply and 1,700,000 m2 in net absorption region-wide in 2013. 26% rise Y-o-Y in available space region-wide. 5.5 million m2 in planned construction region-wide through 2015. Rents falling Y-o-Y in most of the markets covered.
JLL | Latin America | Office Market Overview | Year end 2013
Introduction: Location Map and Market Clock
San Juan
Monterrey Panama City
Guadalajara Mexico City
Caracas
San José Medellín Cali Guayaquil
Caracas, Santiago, Mexico City Panama City
Barranquilla
Buenos Aires
Bogotá
Bogotá Quito
Lima Rio de Janeiro
Rio de Janeiro São Paulo Peaking market
Lima
São Paulo
Falling market
Monterrey
Santiago Rising market
Bottoming market
Guadalajara
Medellín
San José Barranquilla
Montevideo Buenos Aires
San Juan Cali Montevideo, Guayaquil, Quito
2
JLL | Latin America | Office Market Overview | Year end 2013
3
Executive Summary: Population by Country and Major Markets, 2012
Montevideo Uruguay Panama City Panama San Juan Puerto Rico San José Costa Rica 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
20
40
60
80
100
120
140
160
180
200
Source: JLL Research (2014)
•
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.
JLL | Latin America | Office Market Overview | Year end 2013
Executive Summary: GDP by Country and Major Markets (USD – PPP, 2012)
$2,500
$30,000
Country GDP (Billions of USD – PPP)
Major Market GDP (USD – PPP)
Country GDP Per Capita (USD – PPP)
$2,000
$25,000
$1,500
$15,000
$1,000
GDP Per Capita (USD, PPP)
GDP (Billions of USD, PPP)
$20,000
$10,000
$500 $5,000
$-
Brazil São Paulo Rio de Janeiro Mexico Mexico City Monterrey Guadalajara Colombia Bogota Medellin Cali Barranquilla Argentina Buenos Aires Peru Lima Venezuela Caracas Chile Santiago Ecuador Quito Guayaquil Costa Rica San José Puerto Rico San Juan Panama Panama City Uruguay Montevideo
$-
Source: JLL Research (2014)
•
Brazil and Mexico are Latin America’s largest economies, however on a GDP per capita basis the best performers are Chile and Argentina. Puerto Rico has seen the largest dip in GDP per capita, due to the island’s ongoing recession.
•
The cities that account for the largest share of their national GDP are Montevideo (~70%), Panama City (~58%), Lima (~46%), San Juan (~42%), San José (~38%), and Santiago (~40%).
4
JLL | Latin America | Office Market Overview | Year end 2013
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Executive Summary: Total Stock (m²), EY 2013
Mexico City São Paulo Santiago Rio de Janeiro Bogotá Buenos Aires Caracas Lima
Monterrey San José Panama City San Juan Medellín Quito Montevideo Guayaquil Guadalajara Cali Barranquilla 0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Rentable Area (Millions of m2) Source: JLL Research (2014)
•
The largest office markets in Latin America are Mexico City, São Paulo, and Santiago. This is consistent with their reputations as 3 of the primary business hubs in the region.
•
The fastest growing markets over the past two years have been Bogotá and Lima due to a large pent-up demand and a favorable investment climate, as well as Panama City due to high levels of speculative production.
JLL | Latin America | Office Market Overview | Year end 2013
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Executive Summary: Vacancy Rates, EY 2013
Panama City São Paulo
Monterrey San Juan Guayaquil Rio de Janeiro San José Mexico City Montevideo Guadalajara Cali
Market equilibrium vacancy rate
Quito Santiago Buenos Aires Barranquilla Caracas Bogotá Lima Medellín 0%
5%
10%
15%
20%
25%
30%
35%
40%
Office Vacancy Rate, Class A and AB Source: JLL Research (2014)
•
The highest vacancy rates by far are in Panama City, due to an explosion of speculative production fueled by tax incentives and high expectations of growth induced by the canal expansion.
• •
Both Brazilian cities are above equilibrium vacancy due to high levels of production recently that have taken time to absorb. The lowest vacancy rates are in Medellín, Lima, Bogotá, and Caracas.
JLL | Latin America | Office Market Overview | Year end 2013
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Executive Summary: Change in Vacancy (m2), Y-o-Y
N/A
Barranquilla
254,057
Panama City 134,842
São Paulo Mexico City
83,322
Santiago
45,774
Rio de Janeiro
44,963 19,380
Lima
12,277
Guayaquil Montevideo
9,035
Quito
4,675
San José
4,525
San Juan
996
Guadalajara
777
-1,485
Cali
-4,815
Buenos Aires
-6,491
Medellín
-10,500
Monterrey
-21,115
Caracas
-32,030
-50,000
Bogotá -
50,000
100,000 150,000 Vacant Rentable Area (m2)
200,000
250,000
300,000
Source: JLL Research (2014)
•
•
The highest Y-o-Y increase in available supply was in Panama City, where there are a stunning 250,000 m2 more vacant square meters than there were last year in a market of only 800,000 m2. Vacancy has risen sharply in Rio, São Paulo, Mexico City, and
•
Santiago thanks to an abundance of new supply. Bogotá and Caracas have seen a significant drop in vacancy over the past year due to limited supply. In the case of Caracas this is a consequence of supply-restricting policies; in the case of Bogotá , it is due to pent-up demand.
JLL | Latin America | Office Market Overview | Year end 2013
Executive Summary: Production vs. Net Absorption (m2), Y-o-Y
Mexico City São Paulo Santiago
Panama City Rio de Janeiro Lima San José Bogotá
Net Absorption
Buenos Aires
Production
Quito Caracas
*Net absorption figures not available for Montevideo and Barranquilla.
Medellín Barranquilla Guadalajara
Guayaquil Monterrey Montevideo Cali San Juan -
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
Rentable Area (m2) Source: JLL Research (2014)
•
•
Mexico City has been the most active market over the past year, with approximately 400,000 m2 of net absorption and over 400,000 m2 new supply. Office absorption in Lima has reached nearly 150,000 m2, practically on par with much larger markets such as Santiago
•
and Rio and evidence of the high demand there at this moment. In San Juan net absorption has been very low, however it picked up slightly over 2012 when it registered negative net absorption.
8
JLL | Latin America | Office Market Overview | Year end 2013
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Executive Summary: Production Pipeline vs. Current Stock (m2)
21%
Mexico City 33%
São Paulo 20%
Santiago Rio de Janeiro
32%
Bogotá
23% 14%
Buenos Aires 8%
Caracas
46%
Lima
16%
Monterrey
San José
16%
Panama City
47%
10%
Quito Montevideo
0%
Guayaquil
11%
Guadalajara
80%
Cali
25% 57%
Barranquilla
0.0 Source: JLL Research (2014)
•
*Data label shows percentage growth in stock, Q1 2014 - Q4 2015
19%
Medellín
•
Production: Q1 2014 - Q4 2015
0%
San Juan
•
Current Stock: End-Year 2013
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Rentable Area (Millions of m2)
The cities that will see the most growth relative to their current market size through 2015 are Panama City, Lima, São Paulo, Rio, Barranquilla, and Guadalajara. These markets are all expected to grow at least 30% by then. Low demand is impeding new supply in San Juan and Montevideo. There is growing interest in Latin America’s secondary cities since they are mostly undersupplied and many have high
•
economic potential. Cities such as Barranquilla, Cali, Medellin, and Guadalajara are examples of this trend. Production after 2016 will take a hit due to the expected rise in US interest rates, which will make emerging market investments relatively less attractive. However, the total effect on office production will ultimately depend more on the growth of Latin American countries and whether there is demand for this type of asset.
JLL | Latin America | Office Market Overview | Year end 2013 10
Executive Summary: Average Asking Rents, EY 2013
Rio de Janeiro São Paulo Caracas Bogotá Montevideo Lima Buenos Aires Santiago Mexico City Cali Medellín Guadalajara
Average Rent Class A
Panama City Barranqulila
Average Rent Class AB
Monterrey San Juan Quito
San José Guayaquil $0
$10
$20
$30
$40
$50
$60
$70
Average Asking Rents (USD/m2/month) Source: JLL Research (2014)
• •
Rents in most cities are in the range of USD $20-35/m2/month for Class A and USD $15-30/m2/month for Class AB. Rio has high rents due to geographical impediments that restrict supply. Rents are high in São Paulo because the vast size of the city and its severe traffic put a premium on prime location and good accessibility.
• •
High vacancy in Class A properties in Panama City have pushed rents down to Class AB levels. San Jose is experiencing fairly high demand, however rents have remained low since a large amount of stock is comprised of flexible space in or near industrial parks or Free Trade Zones.
JLL | Latin America | Office Market Overview | Year end 2013 11
Executive Summary: Change in Average Rents, Y-o-Y
Barranquilla
Percent Change: Class A Avg. Rent
Cali Lima
Percent Change: Class AB Avg. Rent
Quito Montevideo Mexico City Monterrey Santiago Guadalajara Guayaquil Bogotá Panama City Buenos Aires San Juan San José Medellín Rio de Janeiro São Paulo Caracas
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
% Change in Average Rents, Y-o-Y Source: JLL Research (2014)
• •
•
Prices have risen in Cali, Barranquilla, Lima, and Quito because they are growing and undersupplied markets. Most major markets in Latin America have seen rents fall yearon-year. This is due to a spike in new supply over the past few years that has outpaced demand in most cities, especially in Rio de Janeiro and São Paulo. Rents have fallen in Bogota and Medellin when stated in
•
dollars, due to the weakening of the Colombian Peso. The fall in rents in Caracas is more attributable to monetary policy rather than the dynamics of supply and demand. This past November the government issued a decree capping rents at 250 Bolivares per m2 (about USD $40) after runaway inflation was driving rents up to between USD $200-300 per m2 at the official exchange rate.
JLL | Latin America | Office Market Overview | Year end 2013 12
Executive Summary: Global Office Development, 2012-2015
25
2015 (F) 2014 (F) 2013
Rentable Area (Millions of m2)
20
2012
15
10
5
0 USA
Europe
Asia Pacific
Latin America
Source: JLL Research (2014)
•
•
The most active region this past year was Asia Pacific, which saw the construction of approximately 5 million m2. Europe followed, with about 4.6 million m2of new construction. Latin America saw record production in 2013, surpassing 2 million m2 of new office space.
•
•
Latin America will see another 5 million m2 of new construction by the end of 2015, likely surpassing expected production in the United States. Europe and Asia Pacific will continue to outpace the rest of the world over the next two years, with over 10 million m2 in expected production in each region by the end of 2015.
JLL | Latin America | Office Market Overview | Year end 2013 13
Market Snapshots
Buenos Aires, Argentina
14
São Paulo, Brazil
15
Rio de Janeiro, Brazil
16
Santiago, Chile
17
Bogotá, Colombia
18
Medellín, Colombia
19
Cali, Colombia
20
Barranquilla, Colombia
21
San José, Costa Rica
22
Quito, Ecuador
23
Guayaquil, Ecuador
24
Mexico City, Mexico
25
Monterrey, Mexico
26
Guadalajara, Mexico
27
Panama City, Panama
28
Lima, Peru
29
San Juan Puerto Rico
30
Montevideo, Uruguay
31
Caracas, Venezuela
32
Comparison of market leasing practices
33
Contacts
36
JLL | Latin America | Office Market Overview | Year end 2013
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Argentina – Buenos Aires
Macroeconomic overview
• Argentina’s GDP grew 3% during 2013. The main drivers of this performance were the improvement in the agricultural harvest, automotive industry, the upturn in construction, and consumption. • Inflation, the fiscal unbalance, and the international reserves were the main issues in 2013. The inflation rate accelerated due to the higher devaluation rate of the Peso (from ARS 4.92 per USD to 6.52). • The main challenges in 2014 are to alleviate the pressures in the foreign exchange market and to moderate the inflation rate without generating a large negative impact on wages.
Market trends • In 2013 56,300 m² were added to the corporate office inventory, a 40% Y-o-Y increase (compared to 29,000 m² in 2012). About 60,000 m² are expected to be delivered in 2014, however several projects have undergone delays which could lead to an overestimated future supply. • Absorption in 2013 accrued 60,000 m² which suggests a modest recovery, closely aligned with the five-year absorption average. • The year-end vacancy rate is 4.5%, slightly below that of a year ago. • Class A rents are between USD $27-30/m²/month, while Class AB/B+ rents are between USD $18-24/m²/month. Rental rates in general have been climbing for the past few years, however in 2013 overall prices have remained stagnant.
Office market statistics Total stock (m²) Overall vacancy rate
1,193,000 4.9%
Production – 2013 (m²)
56,000
Net absorption – 2013 (m²)
60,000
Expected production – 2014 (m²)
83,000
Expected net absorption – 1st half 2014 (m²)
N/A
Class A rental range (USD/m²/mo.)
$27-$30
Class AB/B+ rental range (USD/m²/mo.)
$18-$24
Average purchase price range (USD/m²)
$3,000 – $4,500
Historic production, absorption, and vacancy
JLL | Latin America | Office Market Overview | Year end 2013
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Brazil – São Paulo
Macroeconomic overview
• Rising inflation and interest rates, low growth, and currency depreciation have cast a shadow on the Brazilian economy in 2013. Similar problems could persist in 2014, dampening the country’s prospects for growth in the short term.
Office market statistics Total stock (m²) Overall vacancy rate
3,621,000 18.4%
• In 2013, the US dollar appreciated 15,37% against the Brazilian Real, closing at R$2.357.
Production – 2013 (m²)
336,000
• Due to inflationary pressure, SELIC interest rate rose from 7.25% in June 2013 to 10% in November 2013. It rose again to 10.5% in January 2014.
Net absorption – 2013 (m²)
189,000
Expected production – 2014 (m²)
581,000
• The inflation index (IPCA) increased from 5.77% in 2012 to 5.91% in 2013.
Expected net absorption – 1st half 2014 (m²)
125,000
Class A rental range (USD/m²/mo.)
$39-$91
Class AB/B+ rental range (USD/m²/mo.)
$35-$78
Average purchase price range (USD/m²)
$5,000 - $8,000
• The Brazilian Ministry of Tourism expects over 600,000 foreign tourists to come to Brazil in between June and July 2014 due to the World Cup. Market trends • Cap rates are likely to increase during 2014, and shall come back to double digits as the cost of money and volatility in the Brazilian markets is rising. • Although net absorption in São Paulo has been significant, office production has been well ahead of the demand. Over 300,000 m2 were completed in 2013, with well over 1,000,000 m2 expected to be completed by the end of 2015. • High production has pushed the vacancy rate up from 16% a year ago to 18.4%. This should continue to rise over the next few years. • Rental rates continue falling, pushed down by the high vacancy rates.
Historic production, absorption, and vacancy
JLL | Latin America | Office Market Overview | Year end 2013
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Brazil – Rio de Janeiro
Macroeconomic overview
• Rising inflation and interest rates, low growth, and currency depreciation have cast a shadow on the Brazilian economy in 2013. Similar problems could persist in 2014, dampening the country’s prospects for growth in the short term.
Office market statistics Total stock (m²) Overall vacancy rate
1,639,000 14.6%
• In 2013, the US dollar appreciated 15,37% against the Brazilian Real, closing at R$2.357.
Production – 2013 (m²)
175,000
• Due to inflationary pressure, SELIC interest rate rose from 7.25% in June 2013 to 10% in November 2013. It rose again to 10.5% in January 2014.
Net absorption – 2013 (m²)
140,000
Expected production – 2014 (m²)
158,000
• The inflation index (IPCA) increased from 5.77% in 2012 to 5.91% in 2013.
Expected net absorption – 1st half 2014 (m²)
• The Brazilian Ministry of Tourism expects over 600,000 foreign tourists to come to Brazil in between June and July 2014 due to the World Cup.
Class A rental range (USD/m²/mo.)
$30-$120
Class AB/B+ rental range (USD/m²/mo.)
$26-$111
Average purchase price range (USD/m²)
$4,000 - $7,000
Market trends • Rental rates in Rio de Janeiro have fallen in the 2nd half of 2013, and should continue falling in the near future as high production has outpaced demand. • The vacancy rate is likely to increase in Barra da Tijuca, due to a large amount of new stock that has been recently delivered there.
• In the next years, the development of the Porto Maravilha region will impact the downtown market, as several new developments of high quality are being planned. The new stock expected for Porto Maravilha will represent 25% of the Rio de Janeiro market by 2019.
90,000
Historic production, absorption, and vacancy
JLL | Latin America | Office Market Overview | Year end 2013
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Chile - Santiago
Macroeconomic overview
• Michelle Bachelet earned her second term as President, winning 62% of the popular vote in the November election. • Local confidence remains high in Chile, with increased bank lending, a strong labor market, and rising wages. However, some indicators suggesting stagnation have appeared. Market trends • 2013 was one of the highest years historically for office production in the Santiago market, as nearly 200,000 m2 were completed. • New supply pushed the general market vacancy up to 5.2% at year-end. This could be a healthy sign, as the vacancy rate has been below 5% since 2004. • Annual absorption was close to 155,000 m2, mostly concentrated in the Class A segment which accounted for about 100,000 m2 of demand. • Rental rates in the local unit, Unidades de Fomento, escalated from UF 0.62/m2 to UF 0.63/m2 for Class A and from UF 0.46/m2 to UF 0.47/m2 for Class AB. On the other hand, the depreciation of the Chilean Peso maintained rents in terms of US dollars. Class A rents settled at US$ 28/m2 and Class AB rents at US$ 21/m2. • Forecasted production in the medium term is very high, with over 500,000 m2 estimated to be completed by the end of 2015.
Office market statistics Total stock (m²) Overall vacancy rate
2,879,000 5.2%
Production – 2013 (m²)
201,000
Net absorption – 2013 (m²)
155,000
Expected production – 2014 (m²)
300,000
Expected net absorption – 1st half 2014 (m²)
70,000
Class A rental range (USD/m²/mo.)
$18-$34
Class AB/B+ rental range (USD/m²/mo.)
$16-$29
Average purchase price range (USD/m²)
$2,200 - $4,500
Historic production, absorption, and vacancy
JLL | Latin America | Office Market Overview | Year end 2013
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Colombia - Bogotá
Macroeconomic overview
• The economic situation around the world has had a deteriorating effect on the Colombian Peso recently. • Unemployment has falling to 9.64% but still is one of the highest in Latin America. The economy is expected to grow at between 4 – 4.5% in 2014 and remain at that pace in the medium term. • Foreign direct investment reached USD $16.8 billion in Colombia in 2013, barely topping 2012’s record FDI total. The vast majority of this investment went into the extractive sector, including petroleum, hydrocarbons, and minerals.
Office market statistics Total stock (m²) Overall vacancy rate
1,638,000 3.0%
Production – 2013 (m²)
120,000
Net absorption – 2013 (m²)
116,000
Expected production – 2014 (m²)
179,000
Expected net absorption – 1st half 2014 (m²)
90,000
Market trends
Class A rental range (USD/m²/mo.)
$31-$45
• Access to foreign capital has allowed developers to offer better quality and amenities such as mixed-used and LEED certified architecture.
Class AB/B+ rental range (USD/m²/mo.)
$28-$39
Average purchase price range (USD/m²)
$3,000 - $7,000
• The most active submarkets in 2013 in terms of absorption were Salitre and Northwest (40,000 m2 each in net absorption), and Chicó (24,000 m2). These three submarkets accounted for nearly 90% of total office demand in 2013. • The sectors that saw the most new production were Northwest (33,000 m2), Salitre (29,000 m2), and Chicó (16,000 m2). • Most of the available area is contained in offices smaller than 300 m2, despite the growing demand for offices larger than 500 m2. • Rents have moderated due to the weakened peso; COP $75,000/m2/month a year ago translated to USD $38.50, but this year translates to $36.75.
Historic production, absorption, and vacancy
JLL | Latin America | Office Market Overview | Year end 2013
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Colombia - Medellín
Macroeconomic overview
• The department of Antioquia, of which Medellin is the capital, is Colombia’s top exporting state and accounts for 12% of national GDP. • Recently Medellin has became an attractive city to invest in, with skilled labor, availability and quality of public utilities, strategic location, market size, and high quality of life levels. • Medellin is rated high in transparency and sound fiscal management, an expansive economy, and a corporate foundation enhanced by strategic clusters.
Office market statistics Total stock (m²) Overall vacancy rate
515,000 2.2%
Production – 2013 (m²)
33,000
Net absorption – 2013 (m²)
39,000
Expected production – 2014 (m²)
35,000
Expected net absorption – 1st half 2014 (m²)
17,000
Market trends
Class A rental range (USD/m²/mo.)
$21-$32
• The largest concentration of office stock is in El Poblado, where approximately 172,000 m2 of quality office space can be found.
Class AB/B+ rental range (USD/m²/mo.)
$15-$25
• Centro, the old downtown, has a significant concentration (144,000 m2), spurred by several urban redevelopment projects in the past few years. Poblado Norte has the largest stock of Class A buildings, while El Poblado has the largest stock of Class AB properties. Office activity in “Other” – decentralized areas of the city – is limited to a handful of Class AB buildings.
Average purchase price range (USD/m²)
$2,500 - $3,500
• Medellín has the lowest vacancy rate of any major city in Latin America as of Q4 2013. • The highest rents are typically found in El Poblado, though some buildings in Poblado Norte – notable Interplaza and Ciudad del Rio – are able to quote higher rents since they are able to offer larger areas than most buildings in El Poblado can offer.
Historic production, absorption, and vacancy
JLL | Latin America | Office Market Overview | Year end 2013
20
Colombia - Cali
Macroeconomic overview
• Cali is the capital of Valle de Cauca, Colombia’s 3rd most productive department and home to the country’s busiest port in Buenaventura. • The GDP of the Department of Valle del Cauca, represents 10% of GDP in Colombia. The GDP per capita in 2012 was USD $7,745.
Office market statistics Total stock (m²)
161,000
Overall vacancy rate
6.5%
Production – 2013 (m²)
6,300
• The department has developed its production capacity in almost all branches of economic activity, particularly the industrial, agroindustrial, and service sectors.
Net absorption – 2013 (m²)
16,000
Expected production – 2014 (m²)
26,000
• The Valle de Cauca region is developing better integration of their production processes by forming industry clusters.
Expected net absorption – 1st half 2014 (m²)
10,000
Market trends • Cali’s market is mostly concentrated in the submarkets of Centro, Versalles, and Ciudad Jardin, though a large proportion of the stock (about 35%) can be found in decentralized and nonconsolidated areas. • One reason why many investors are optimistic about the Cali market is the sharply declining speculative vacancy rate, which has fallen from 20% in 2010 to 10% a year ago and down to 6.5% today. • Rents are highest in Ciudad Jardin and Versalles – Cali’s highincome and high-amenity neighborhoods – and are lowest in Centro. New office projects are pre-selling at between USD $1,900-$3,100/m2, varying based on location, size of office, and floor. • There still remains a reluctance to finance office projects that do not have the backing of a large anchor, which is inhibiting new supply.
Class A rental range (USD/m²/mo.)
$21-$26
Class AB/B+ rental range (USD/m²/mo.)
$14-$23
Average purchase price range (USD/m²)
$1,900 - $3,100
Stock, production, and vacancy by submarket
JLL | Latin America | Office Market Overview | Year end 2013
21
Colombia - Barranquilla (and Caribbean)
Macroeconomic overview
• Barranquilla is the fourth largest city in Colombia in terms of population (1,200,000 inhabitants), and is receiving historically high levels of investment due to its status as the biggest industrial city on Colombia’s Caribbean coast. • The industrial sector remains the motor of the local economy, accounting for more than 80% of all exports that leave from Barranquilla. • Key economic bases in Barranquilla include metalworking, logistics, energy and business services, and food and beverage production.
Market trends • The financial and commercial hubs are concentrated in the areas of Prado and Buenavista, the city’s highest income neighborhoods. • Barranquilla’s Class A and AB office market is very limited as of 2013. It is distributed almost exclusively in Prado. Including office stock in nearby Cartagena and Santa Marta yields a total of about 107,000 m2. By 2016 the market is expected to more than double. • This fairly low vacancy rate suggests that there is a need for new supply. Investors have taken note, and a relative boom in office production is expected in the medium term.
• The majority of the new production is happening in the Buenavista submarket. Although there are no buildings operating here presently, it will contain about 35% of the market by 2016. The highest rents can be found in pre-leased spaces in this submarket.
Office market statistics Total stock (m²) Overall vacancy rate Production – 2013 (m²) Net absorption – 2013 (m²)
107,000 4.8% 34,000 N/A
Expected production – 2014 (m²)
22,000
Expected net absorption – 1st half 2014 (m²)
10,000
Class A rental range (USD/m²/mo.)
$21-$32
Class AB/B+ rental range (USD/m²/mo.)
$15-$25
Average purchase price range (USD/m²)
$2,500 - $3,500
Stock and future production by submarket
JLL | Latin America | Office Market Overview | Year end 2013
22
Costa Rica – San José
Macroeconomic overview
• The Costa Rican economy slowed down in 2013 to a growth rate of 3%, its lowest since the 2008 recession. The inflation rate dropped from 6% in Q1 2013 to 3.4% by Q4, falling below the Central Bank’s target band. • High value added goods and services have further boosted exports while tourism continues to bring in foreign exchange. • Foreign investors remain attracted by the country's political stability and relatively high education levels, as well as the incentives offered in the Free Trade Zones.
Market trends • The office market is concentrated in Heredia with 37% of the stock, Escazu with 20%, Santa Ana with 19%, Este with 12%, and Rohrmoser with 11%. Unlike most major cities in Latin America, a large portion of the stock is concentrated in Free Trade Zones. • Although the vacancy rate has fallen from last year, it is still considered to be on the high end, meaning that the market remains tenant-favorable. • Production this year was highest in Heredia, driven by new properties in the America Free Zone, Aerocentro, and the mixeduse Real Cariari. These properties together accounted for a third of 2013 production. • Vacancy is highest in “Este” where over 20% of the space is unoccupied. • The most expensive submarkets continue to be Santa Ana and Escazu, which serve as local and regional headquarters for many firms in the finance, insurance, and real estate sectors.
Office market statistics Total stock (m²)
877,000
Overall vacancy rate
11.9%
Production – 2013 (m²)
93,000
Net absorption – 2013 (m²)
93,000
Expected production – 2014 (m²)
62,000
Expected net absorption – 1st half 2014 (m²)
34,000
Class A rental range (USD/m²/mo.)
$17-$23
Class AB/B+ rental range (USD/m²/mo.)
$15-$20
Average purchase price range (USD/m²)
$2,000 - $2,300
Historic production, absorption, and vacancy
JLL | Latin America | Office Market Overview | Year end 2013
23
Ecuador - Quito
Macroeconomic overview
• Quito, the capital of Ecuador, is the center of the political, economic and social activities. It is the second city of economic importance after Guayaquil. • Ecuador’s GDP grew by 3.5% in 2013. Exports rose 4.8% and imports 8.4% in USD terms. Higher exports were primarily driven by increased shipments of crude oil (albeit those of petroleum products fell significantly) and strong growth in shrimp, fish and banana exports. • Ecuador continues to be a high-risk country for foreign investment. Particular areas of weakness include economic, legal, and operational risks, largely due to the government's tendency towards protectionist policies and resource nationalism. Market trends • Demand has risen over the past year particularly among service and pharmaceutical companies. Several European consulting firms have also settled in Quito, as their home countries continue to struggle. There is also significant demand from oil companies and the public sector. • Quito’s prime office stock consists mainly (~70%) of spaces that are less than 400 m². The market for large spaces is a small but growing segment of the demand.
• Vacancy has remained between 5-7% over the past year, though it could fall in the medium-term as both the public and private sectors are actively expanding. • The highest rents are commanding USD $24/m2/month, though pre-leased spaces are asking up to $26/m2/month.
Office market statistics Total stock (m²) Overall vacancy rate
475,000 6.1%
Production – 2013 (m²)
52,000
Net absorption – 2013 (m²)
56,000
Expected production – 2014 (m²)
21,000
Expected net absorption – 1st half 2014 (m²)
12,000
Class A rental range (USD/m²/mo.)
$15-$24
Class AB/B+ rental range (USD/m²/mo.)
$11-$18
Average purchase price range (USD/m²)
$1,500 - $1,900
Stock distribution by submarket
JLL | Latin America | Office Market Overview | Year end 2013
24
Ecuador - Guayaquil
Macroeconomic overview
• Guayaquil has surpassed Quito as the most populated city in Ecuador. • Guayaquil's economic importance is primarily based in its ports, which handle more than half of Ecuador's exports and imports. • Over the last decade Guayaquil has made notable progress by renovating its coastline and introducing a bus rapid transit system. Market trends • The oldest office submarket is Centro, or the old downtown. Over 40% of the stock is contained in buildings that are less than 5 years old, reflecting the intensity of recent development in the Guayaquil market compared to its total stock. • Office absorption this year was at 26,000 m2, representing nearly a 40% increase over 2012 totals. • All of 2013’s production is contained in The Point, a 27,000 m2 office tower that anchors an ambitious boardwalk development project called Ciudad del Rio. This complex should compete with Ciudad del Sol, Guayaquil’s predominant commercial center., though it is catered more toward a luxury crowd. • Projects to watch over the next few years are Plaza Constitución and America Centro Corporativo. These projects will add about 30,000 m2 in the Kennedy submarket over the next few years.
Office market statistics Total stock (m²)
255,000
Overall vacancy rate
15.8%
Production – 2013 (m²)
28,000
Net absorption – 2013 (m²)
26,000
Expected production – 2014 (m²)
16,000
Expected net absorption – 1st half 2014 (m²)
5,000
Class A rental range (USD/m²/mo.)
$14-$20
Class AB/B+ rental range (USD/m²/mo.)
$11-$16
Average purchase price range (USD/m²)
$1,400 - $2,000
Stock distribution by submarket
JLL | Latin America | Office Market Overview | Year end 2013
25
Mexico – Mexico City
Macroeconomic overview
• Economic activity is expected to register modest growth during the 4Q13 (1.5% to 2.0% GDP growth relative to the 4Q12); the final figure will be released February 21st. • During the 4Q and relative to the same period a year ago, employment grew 2.9% while wages grew in line with inflation (3.7% in both cases). • Non-oil exports increased 4.1% during the quarter vs. 3.9% throughout 2013. • Expectations of GDP growth in 2014 are more favorable; the central bank December poll of 38 private firms expects GDP growth of 3.4%. Market trends • 2013 was strong in terms of demand, with over 397,000 m2 of net absorption. Total transacted space – including new leases, preleases, renewals, subleases, and office sales - reached 739,000 m2. Production in the second half of the year reached 139,239 m2. • Vacancy across Mexico City is currently at 11%, leaving over 500,000 m2 of office space available at the moment. Vacancy has remained steady over the last two years. • The outlook for Mexico City suggests a period of considerable expansion with growth in central submarkets. • Rents are registering up to USD $35/m2/month in the Polanco, Reforma, and Lomas de Chapultepec submarkets. More affordable areas include Insurgentes, Perisur and Norte.
Office market statistics Total stock (m²) Overall vacancy rate
4,628,000 11%
Production – 2013 (m²)
397,000
Net absorption – 2013 (m²)
397,000
Expected production – 2014 (m²)
415,000
Expected net absorption – 1st half 2014 (m²)
160,000
Class A rental range (USD/m²/mo.)
$25-$35
Class AB/B+ rental range (USD/m²/mo.)
$21-$25
Average purchase price range (USD/m²)
$2,700 - $6,000
Vacancy and absorption by submarket
JLL | Latin America | Office Market Overview | Year end 2013
26
Mexico – Monterrey
Macroeconomic overview
• Monterrey is the capital of Nuevo Leon, a key industrial hub in Mexico as well as all North America. It features prominent steel, cement, glass, manufacturing, electronics, and auto industries. It is also seeing significant growth in the back office, call center, and data center sectors.
Office market statistics Total stock (m²)
900,000
Overall vacancy rate
21.9%
Production – 2013 (m²)
18,000
Net absorption – 2013 (m²)
34,000
Expected production – 2014 (m²)
47,000
Market trends
Expected net absorption – 1st half 2014 (m²)
25,000
• 2012 was one of the busiest years in terms of new construction projects in Monterrey. During this year work began on the city’s first LEED buildings, particularly Saggara and Sofia.
Class A rental range (USD/m²/mo.)
$19-$25
Class AB/B+ rental range (USD/m²/mo.)
$13-$18
• Valle Oriente remains the submarket with the most office activity. However new developments are appearing in the sectors of Santa Maria and Centro/Obispado, suggesting a future gravitation towards these parts of the city.
Average purchase price range (USD/m²)
$1,500 - $3,000
• With these assets, along with a highly educated population, Monterrey consistently ranks as one of the best Latin American cities for doing business.
• Several new projects are combining residential, office, and commercial into one development. Many of these will be ready by 2015. • The vacancy rate in Monterrey has risen steadily over the past year, from 19% at the end of 2012 to nearly 22% now.
• Production looks set to increase steadily over the next few years, with about 120,000 m2 in all to be delivered by the end of 2015.
Stock, vacancy, and rents by submarket
JLL | Latin America | Office Market Overview | Year end 2013
27
Mexico – Guadalajara
Macroeconomic overview
• Guadalajara is one of the ten largest economic cities in Latin America in terms of GDP, third in Mexico just behind Mexico DF and Monterrey. • Guadalajara is known as the "the Mexican Silicon Valley" due to its technology industry. The city is the main technology producer in the country, with an offering of advanced IT services including application design, development and testing, embedded software for the automotive industry, wireless applications, printers and medical devices, and multimedia. Market trends
• Quality office spaces in Guadalajara are primarily concentrated in 2 submarkets - Americas and Puerta de Hierro, which contain 66% of the market share. • Guadalajara is experiencing rapid commercial development throughout the city. • Average vacancy for all Guadalajara is 7%. Vallarta has the highest vacancy rate of the existing stock, at nearly 30%. • The pre-lease market has been very active, evidenced by the 65% occupancy in buildings to be completed in 2014. • Over 140,000 m2 are planned to be delivered by the end of 2015, mostly in 2014 (93,127 m2 in 6 projects). • Americas and Vallarta submarkets will show the biggest growth in the next few years with 95% of the new production.
Office market statistics Total stock (m²) Overall vacancy rate
168,00 6.8%
Production – 2013 (m²)
29,000
Net absorption – 2013 (m²)
43,000
Expected production – 2014 (m²)
93,000
Expected net absorption – 1st half 2014 (m²)
40,000
Class A rental range (USD/m²/mo.)
$19-$25
Class AB/B+ rental range (USD/m²/mo.)
$15-$20
Average purchase price range (USD/m²)
$2,800 - $3,500
Stock, production, and vacancy by submarket
JLL | Latin America | Office Market Overview | Year end 2013
28
Panama – Panama City
Macroeconomic overview
• Panama’s real GDP growth, though the highest in Latin America, slowed by a tenth of a percent to 7.6% in 2013, however it is expected to remain strong due to high public infrastructure spending. • Presidential and legislative elections are coming up in May 2014, though it is highly unlikely that the winning candidate should alter the country’s economic and political direction. • Prospects for sustained economic growth look promising, considering Panama’s overall business-friendly legal environment and its menu of tax, immigration, and labor incentives.
Market trends • Much of the production can be attributed to speculation on economic growth resulting from the expanded canal as well as easier access to credit. • Demand in 2013 dropped to its lowest level since 2010. The vast majority of this occurred in the Corredor Sur (25,000 m2) and San Francisco (22,000 m2) submarkets. • The Banking District leads Class A submarket vacancy with over 60%. This is followed by San Francisco with over 48%, the Corredor Sur submarket with 26%, and the Reverted Areas with 23%.
• Asking rates for new Class A commercial office space are highest in the Corredor Sur submarket, with an average of USD $24/m2/month. This can be explained by the appeal and image of Costa del Este, a fast-growing campus of skyscrapers that typically command higher rents
Office market statistics Total stock (m²) Overall vacancy rate Production – 2013 (m²) Net absorption – 2013 (m²) Expected production – 2014 (m²) Expected net absorption – 1st half 2014 (m²)
864,000 37.3% 175,000 48,000 225,000 34,000
Class A rental range (USD/m²/mo.)
$15-$28
Class AB/B+ rental range (USD/m²/mo.)
$12-$25
Average purchase price range (USD/m²)
$1,800 - $3,700
Historic production, absorption, and vacancy
29
JLL | Latin America | Office Market Overview | Year end 2013
Peru - Lima
Macroeconomic overview
• Lima dominates Peru's economic scene, accounting for half of national GDP and containing over a third of the country's total population. • An expanded export sector, foreign direct investment, and increased domestic consumption were key factors in the country’s 5% annual growth rate. • Recently ratified free trade agreements with the United States and European Union should create more opportunities for Peruvian exporters.
Office market statistics Total stock (m²) Overall vacancy rate
1,052,000 2.8%
Production – 2013 (m²)
147,000
Net absorption – 2013 (m²)
134,000
Expected production – 2014 (m²)
168,000
Expected net absorption – 1st half 2014 (m²)
72,000
Market trends
Class A rental range (USD/m²/mo.)*
$22-31
• Lima’s office market is concentrated in 4 submarkets: 37% in San Isidro CBD, the financial hub; 26% in Este, which encompasses the municipalities of Surco, San Borja, and La Molina; 21% in San Isidro West; and 13% in Miraflores. Another 3% is distributed in the historic downtown and decentralized areas.
Class AB/B+ rental range (USD/m²/mo.)*
$19-28
Average purchase price range (USD/m²)
$2,750 – $3,500
• Lima will experience a boom in office production over the next few years, with over 700,000 m2 planned for delivery between 2014-2016. • New buildings this year were delivered with an average of 80% occupancy, a testament to Lima’s pent-up demand. • Citywide vacancy is currently 2.8%, one of the lowest vacancy rates in Latin America. • Rents are at the same level in San Isidro and Miraflores and are a bit lower in Este. However, considering the expected explosion of supply, prices are likely to stabilize in the short-term but then slightly decrease when the supply begins to outpace absorption.
*These rents include parking fees, which are an obligatory cost for tenants in Peru.
Historic production, absorption, and vacancy
30
JLL | Latin America | Office Market Overview | Year end 2013
Puerto Rico – San Juan
Macroeconomic overview
• Puerto Rico entered its eighth consecutive year of negative economic growth. The government has taken important strides recently to shore up their fiscal position, including a reform of the tax code aimed at stimulating domestic demand.
Office market statistics Total stock (m²) Overall vacancy rate
• Puerto Rico has a GDP per capita (PPP) of approximately USD $16,000.
Production – 2013 (m²)
• The unemployment rate has fallen from 15.2% in 2012 to 14% in 2013, however this likely reflects a significant share of the population that have either left the island or withdrawn from the labor pool.
Net absorption – 2013 (m²)
• Puerto Rico has changed from an agricultural economy, based primarily on sugar, tobacco, and coffee products, to a thriving modern industrial and services oriented economy. 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. • Vacancy is lowest among Class A buildings (around 14%) and higher for Class B (18%) and Class C (25%). • The highest rents in San Juan can be found in Hato Rey. Guaynabo rents are slightly lower. • The San Juan prime office market continues to be tenantfavorable. Investors, users, and corporate clients are taking advantage, using sub-leases and early contract re-negotiations.
768,000 16.5% 0 13,000
Expected production – 2014 (m²) Expected net absorption – 1st half 2014 (m²)
0 2,400
Class A rental range (USD/m²/mo.)*
$14-$20
Class AB/B+ rental range (USD/m²/mo.)*
$11-$18
Average purchase price range (USD/m²)
$1,800 - $2,200
*Rents in San Juan are typically quoted in ft2, but are stated in m2 in this report for consistency and comparative purposes.
Historic production and rents
JLL | Latin America | Office Market Overview | Year end 2013
31
Uruguay - Montevideo
Macroeconomic overview
• Based on data from Q3 2013, he Uruguayan economy grew by 3.3% Y-o-Y, buoyed mostly by the performance of the service sector. • With neighboring Brazil and Argentina experiencing some deceleration, Uruguay will look for new opportunities to expand a slowing food export sector that is critical to national prosperity. One potential option is Venezuela, which has entered MERCOSUR and is itself experiencing a critical food shortage. • Uruguay ended 2013 with an improved current account balance, cutting its deficit from USD $2.3 billion in 2012 to $1.9 billion in 2013.
• The inflation rate in 2013 was 8.52%, above the target band of 37%. To control inflation, the government has announced a reduction in money supply from 13-15% to 8% by 2015.
Office market statistics Total stock (m²) Overall vacancy rate Production – 2013 (m²) Net absorption – 2013 (m²) Expected production – 2014 (m²) Expected net absorption – 1st half 2014 (m²)
• Prime rents have remained steady over the past 24 months without much change. • Despite a vacancy rate of 7.4%, the market is considered to be oversupplied with availability in all of Montevideo’s submarkets. • Fiscal incentives and building quality are making spaces in the Free Trade Zone more attractive. Currently, 45% of the Class A market is contained within the Free Trade Zones.
7.41% 0 -7,000 0 N/A
Class A rental range (USD/m²/mo.)*
$29-$35
Class AB/B+ rental range (USD/m²/mo.)*
$21-$27
Average purchase price range (USD/m²)
$2,800 – $3,500
Market trends • The completion of the 32,000-m2 World Trade Center at the end of 2012 was the last significant addition to the Montevideo market.
270,000
Stock evolution, 2008-2013
JLL | Latin America | Office Market Overview | Year end 2013
32
Venezuela - Caracas
Macroeconomic overview
• Inflation has reached the 50-60% range Y-o-Y in Venezuela, as government policies have negatively affected the supply side of the economy. • To combat high inflation, the Venezuelan government has passed an “Enabling Law” that gives the executive branch full power to intervene in the private sector by setting prices and limiting profits. • The gap between the parallel exchange rate and the official exchange rate has grown from 5-to-1 in Q2 2013 to 12-to-1 by Q4. • High demand and low supply of dollars in the economy has created serious shortages since importers have trouble paying their international providers. The government has created an auction system for obtaining foreign currency, known as SICAD, however its allocation has been slow, arbitrary, and limited. • Real interest rates are negative, meaning people have little incentive to place their money in the banking system since it will be eaten by inflation. Instead, people are looking to acquire material goods that will maintain their inherent vale in the face of high inflation. Market trends • A December decree passed by Maduro put a cap on all real estate rents at 250 VEF (~USD $40 at the official exchange rate) in order to contain runaway inflation. Before this, rents were surpassing USD $400/m2/month. While this provides short-term relief to tenants, in the long-run it is likely to complicate the supply side. • Venezuela is experiencing negative real interest rates, meaning the inflation rate is far higher than the rate of return on lending money. For this reason, there is significant demand for office sales since it is considered a more reliable way to store money than in the bank
Office market statistics Total stock (m²) Overall vacancy rate
1,057,000 4.3%
Production – 2013 (m²)
33,000
Net absorption – 2013 (m²)
42,000
Expected production – 2014 (m²)
38,000
Expected net absorption – 1st half 2014 (m²)
25,000
Class A rental range (USD/m²/mo.)*
$37-$40
Class AB/B+ rental range (USD/m²/mo.)*
$28-$40
Average purchase price range (USD/m²)
$2,800 – $3,500
Historic rents and vacancy
JLL | Latin America | Office Market Overview | Year end 2013 33
Appendix: Comparison of tenant leasing practices
Argentina
Brazil
Chile
Colombia
Unit Of Measurement
Square meters
Square meters
Square meters
Square meters
Rent Units
USD/m²/month
R$/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
3-5 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 3 years (case by case if agreed)
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)
Basis of Rent Increases or Rent Review
Case-by-case, explicit indexation by CPI is prohibited by law.
Market rate
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
Unless otherwise stipulated in lease, tenant is responsible for paying entirety of contractual obligation
Tenant is responsible for entirety of contract unless otherwise stipulated in contract
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
JLL | Latin America | Office Market Overview | Year end 2013 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 35, varies by submarket
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
JLL | Latin America | Office Market Overview | Year end 2013 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 – Consultant
[email protected] http://latinamerica.am.joneslanglasalle.com Latin America: Southern Cone Martin Potito – Research Director, Latin America
[email protected] http://latinamerica.am.joneslanglasalle.com Brazil Marcelo Sasaki - 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. With annual revenue of $4 billion, JLL operates in 75 countries worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 3 billion square feet and completed $99 billion in sales, acquisitions and finance transactions in 2013. Its investment management business, LaSalle Investment Management, has $47.6 billion of real estate assets under management. For further information, visit www.jll.com. This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without prior written consent of Jones Lang LaSalle IP, Inc. COPYRIGHT © JONES LANG LASALLE IP, INC. 2014
