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JLL Research

Latin America | EY 2016

Latin America prepares for a new political

reality that will affect some countries more

than others.

Main office markets are seeing peak

production which has led to falling rents,

though this has stimulated demand in

many cities.

Office

Contents

Office Market Overview| Latin America | EY 2016

Introduction 3

Market Snapshots

Argentina – Buenos Aires 17

Brazil – São Paulo 18

Brazil – Rio de Janeiro 19

Chile - Santiago 20

Colombia - Bogotá 21

Colombia - Medellín 22

Colombia - Cali 23

Colombia - Barranquilla (and Caribbean) 24

Costa Rica – San José 25

Ecuador - Quito 26

Ecuador - Guayaquil 27

Guatemala – Guatemala City 28

Mexico – Mexico City 29

Mexico – Monterrey 30

Mexico – Guadalajara 31

Panamá – Panamá City 32

Peru - Lima 33

Puerto Rico – San Juan 34

Uruguay - Montevideo 35

Venezuela - Caracas 36

Appendix: 37

Contacts 41

Introduction

3

Location Map

Market ClockMontevideo

Buenos

Aires

Santiago

Rio de

Janeiro

Lima

Bogotá

Monterrey

Mexico City

Guadalajara

San José

Panamá

City

Caracas

GuayaquilQuito

Medellín

San Juan

Cali

São Paulo

Barranquilla

Guatemala City

Santo Domingo

Colombia Caribbean

Rents

Falling

Rental Growth

Accelerating

Rents

Bottoming Out

Rio de Janeiro, San Juan, Guayaquil

Rental Growth

Slowing

San José, Guadalajara

Cali

Quito, Panamá City

Santiago

BogotáMedellín

Monterrey

Buenos Aires

Montevideo

São Paulo, Guatemala City

Mexico City

Lima

Caracas


Introduction

4

Latin America in 2016

In a year when much of the world turned inward, Latin America increasingly looked outward. This is evidenced

by a shift in the political pendulum in several countries: in Brazil, where the impeachment of Dilma Rouseff paved

the way for the more centrist Michel Temer; in Argentina, where Mauricio Macri looks to re-establish access to

international debt markets; in Colombia, where the FARC guerillas are exchanging weapons for registration as a

political party; in Peru, where voters refuted Fujimorismo and opted for Kuczynski´s center-right approach; and in

Ecuador, where the outcome of a 2017 election could reverse the policies of Rafael Correa.

In many ways the region remains vulnerable to events outside its control. Higher interest rates in the United

States have redirected capital flows to the detriment of Latin American, while falling commodity prices have hurt

exports. The result has been a significant decline in terms of trade, which has hurt fiscal revenues, weakened

exchange rates, and cost jobs.

The threat of protectionism around the world raises alarm in Latin America. If rhetoric becomes reality, it would

likely be a blow to agricultural exporters throughout the region, as these are the sectors in the US and Europe

that compete most with Latin American imports. A crackdown on immigration to the US will hurt remittances, a

key economic driver and source of fiscal revenue in several countries. Given its strong cross-border ties Mexico

is sure to be the most affected, though the consequences could be more pronounced in smaller Central

American nations such as Guatemala that are proportionally much more dependent on remittances. Finally, a

renegotiation of the North American Free Trade Agreement (NAFTA) is another potential blow to Mexico, though it

is far from certain what a renegotiated agreement would look like or if it will happen at all. While Mexican

manufacturers would probably be hurt by rising tariffs, some sectors could benefit – for example if an updated

NAFTA allowed Mexico to expedite much needed reforms in the energy and telecommunications sectors, which

would bring down costs for consumers.

In other ways, Latin American countries are more in control of their destiny than ever before. Stronger and more

diversified economies throughout the region are better equipped today to weather external shocks than in the

past. Meanwhile, favorable demographics and a growing middle class continue to drive investment and strong

consumer confidence. Democratic institutions - though they are being severely tested in Venezuela - are

generally growing more emboldened. For all the concern about global political winds, these will remain very

powerful arguments for private sector decision makers moving forward, and they give plenty of reason for

optimism.

JLL Research

January, 2017


0 50 100 150 200 250

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

Guatemala

Guatemala City

Costa Rica

San José

Puerto Rico

San Juan

Panama

Panama City

Uruguay

Montevideo

5 Office Market Overview| Latin America | EY 2016

Population by Country and Major Markets, 2016

• 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.

Source: Oxford Economics (2017)

Country Population (millions)

Major Market Population (millions)

$0

$5.000

$10.000

$15.000

$20.000

$25.000

$30.000

$0

$500.000

$1.000.000

$1.500.000

$2.000.000

$2.500.000

$3.000.000

$3.500.000

Bra

zil

Sao

Pau

lo

Rio

de

Jan

eiro

Mex

ico

Mex

ico

Cit

y

Mo

nte

rrey

Gu

adal

ajar

a

Arg

enti

na

Bu

eno

s A

ires

Co

lom

bia

Bo

gota

Med

ellin Cal

i

Bar

ran

qu

illa

Ven

ezu

ela

Car

acas

Ch

ile

San

tiag

o

Pe

ru

Lim

a

Ecu

ado

r

Qu

ito

Gu

ayaq

uil

Gu

ate

mal

a

Gu

ate

mal

a C

ity

Pan

ama

Pan

ama

Cit

y

Co

sta

Ric

a

San

Jo

se

Uru

guay

Mo

nte

vid

eo

Pu

erto

Ric

o

San

Ju

an

GD

P P

er C

ap

ita

(U

SD

)

GD

P (

Billio

ns

of U

SD

)


GDP by Country and Major Markets, 2016

• 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,

Panamá and Argentina.

• Currency volatility over the past two years has

distorted the size of economies in terms of USD, most

notably Colombia, Chile, Peru, Venezuela, Argentina,

and Brazil.

• Most countries in Latin America saw stagnant growth

in 2016, with a few – Venezuela, Brazil, and Argentina –

going through recessions.

Source: Oxford Economics (2017)

The World bank (2017)

Major Market GDP (USD – PPP)

Country GDP (Billions of USD – PPP)

Country GDP Per Capita (USD – PPP)

7

Total Stock (m²), EY 2016


• The two largest markets in Latin America are Mexico

City, with over 6 million m2

of area, and São Paulo, with

nearly 4.8 million m2. These two cities account for over

one third of the entire office stock of Latin America.

• Latin American office markets are very young, and

have grown significantly over the past 5 years and will

continue to do so. As a reference, only 6 cities in this

region – Mexico City, São Paulo, Santiago, Bogotá, Rio

de Janeiro, and Lima – would rank in the top 40 of US

cities in terms of office stock.

• Adjustments have been made to market size in Quito

and Guayaquil from the 2015 report, relating to an

adjustment in building classifications.

Col. Caribbean

Cali

Montevideo

Guadalajara

Guayaquil

Guatemala City

Quito

Medellín

San Juan

San José

Monterrey

Caracas

Buenos Aires

Panama City

Lima

Rio de Janeiro

Bogotá

Santiago

São Paulo

Mexico City

Rentable Area (m2)Source: JLL Research (2017)

8

Vacancy Rates, EY 2016


0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Buenos Aires

Cali

Guatemala City

Caracas

Guayaquil

Santiago

Montevideo

Medellín

Quito

Bogotá

Mexico City

San José

Monterrey

Guadalajara

Lima

San Juan

São Paulo

Rio de Janeiro

Col. Caribbean

Panama City

Vacancy Rate (%)Source: JLL Research (2017)

• Panamá City and Barranquilla are the two markets with

the highest vacancy rates in the region. Both of these

cities have seen considerable real estate speculation

by investors looking to take advantage of increased

economic activity brought about by the expansion of

the Panamá Canal and Colombia´s proliferation of free

trade agreements.

• Buenos Aires has the lowest vacancy rate at 5% after

several years of relatively little new supply.

• JLL considers 8-12% vacancy to be within the “market

equilibrium” range, meaning neither the tenant nor the

landlord has considerable leverage in negotiations.

Currently 13 of the 20 cities tracked in this report show

vacancy that is above the equilibrium range,

suggesting that they are tenant favorable markets.

Market equilibrium

vacancy rate: 8-12%

9

Change in Vacancy (m2), Y-o-Y


Santiago

Buenos Aires

Panama City

Cali

San José

Monterrey

Guatemala City

Guayaquil

Montevideo

San Juan

Guadalajara

Col. Caribbean

Medellín

Caracas

Bogotá

Quito

Mexico City

São Paulo

Lima

Rio de Janeiro

-50.000 - 50.000 100.000 150.000 200.000 250.000


• Rio de Janeiro and São Paulo have seen vacant area

surge as production has been very high and demand

has been stagnant amidst Brazil´s recession.

• Lima has seen a construction boom in recent years.

While demand has been significant there, new supply

has been high enough to add over 150,000 m2

of

vacant area in the past year.

• Santiago and Buenos Aires saw vacant area fall in the

past year, as demand outpaced new supply.

• With a surge in vacant area, many markets that

traditionally have been very tight – such as Bogotá,

Lima, Medellín, and Quito – are moving to a more

tenant-favorable dynamic.

10

Production (m2), Y-o-Y


- 50.000 100.000 150.000 200.000 250.000 300.000 350.000 400.000 450.000 500.000

San Juan

Montevideo

Cali

Guatemala City

Caracas

Guayaquil

Col. Caribbean

San José

Monterrey

Buenos Aires

Guadalajara

Medellín

Santiago

Quito

Panama City

São Paulo

Rio de Janeiro

Bogotá

Lima

Mexico City


• Mexico City saw the addition of nearly 450,000 m2

of

area in the past year.

• Lima, with 330,000 m2 of new production in 2016, saw

its market grow by almost 20% in one year.

• San Juan has not had any new supply for nearly 10

years, as Puerto Rico continues to deal with a crippling

recession.

• Lima, Bogotá, Rio de Janeiro, São Paulo, and Panamá

City are at or approaching the peak of a construction

boom.

11

Net Absorption (m2), Y-O-Y


-50.000 - 50.000 100.000 150.000 200.000 250.000 300.000 350.000

San Juan

São Paulo

Rio de Janeiro

Montevideo

Guatemala City

Col. Caribbean

Cali

Guadalajara

Guayaquil

Caracas

Monterrey

Medellín

San José

Quito

Buenos Aires

Panama City

Santiago

Lima

Bogotá

Mexico City


• The top 5 cities in net absorption in 2016 were all

capitals of Pacific Alliance countries – Mexico City

(295,000 m2), Bogotá (200,000 m

2), Lima (190,000

m2), Santiago (138,000 m

2), and Panamá City

(132,000 m2). This suggests strong economic

fundamentals in these countries at the moment.

• San Juan and São Paulo were the only two cities that

saw a negative net absorption this past, reflecting the

difficult economic situation facing Puerto Rico and

Brazil recently.

12

Production Pipeline (2017-2019) vs. Current Stock (m2)


0%

6%

15%

13%

38%

24%

23%

22%

17%

16%

18%

24%

33%

12%

23%

160%

11%

24%

35%

23%

- 1.000.000 2.000.000 3.000.000 4.000.000 5.000.000 6.000.000 7.000.000

San Juan

Cali

Montevideo

Guatemala City

Col. Caribbean

Guayaquil

Quito

Medellín

San José

Caracas

Panama City

Buenos Aires

Monterrey

Santiago

Lima

Guadalajara

São Paulo

Rio de Janeiro

Bogotá

Mexico City

Rentable Area (m2)

Current Stock

Production, 2017-2019

* Data label indicates percentage

growth of stock by 2019

Source: JLL Research (2017)

• Mexico City continues to dominate the production

pipeline in Latin America, with over 1.4 million m2 to be

delivered by 2019. This includes an astonishing

800,000 m2

for 2017.

• Other markets that will see significant growth in stock

over the next 3 years are Bogotá, Rio de Janeiro, São

Paulo, Guadalajara, and Lima.

• The markets that will grow the most relative to their

current size over the next 3 years are Guadalajara

(which will more than double by 2019), Bogotá,

Monterrey, and Barranquilla.

13

Average Asking Rents, EY 2016


$- $5 $10 $15 $20 $25 $30 $35 $40

Guatemala City

Guayaquil

Col. Caribbean

Guadalajara

Medellín

San Juan

Monterrey

San José

Lima

Quito

Cali

Bogotá

Panama City

Santiago

Mexico City

Montevideo

São Paulo

Caracas

Buenos Aires

Rio de Janeiro

Average Asking Rent (USD/m2/month)

Average RentClass AAverage RentClass AB


• The most expensive cities in Latin America to lease

office space (in USD) are Rio de Janeiro, Buenos

Aires, Caracas, and São Paulo. However, these rents

are still low compared to other regions in the world.

• Guatemala City – with Class A buildings available for

as low as $11/m2/month – has seen much interest

from call center companies who are looking to

minimize operational costs.

• Rents in Colombian cities have fallen sharply in USD

over the past two years, reflecting a deterioration in the

exchange rate. Rents in local currency have increased

Y-o-Y.


Change in Rents, Y-o-Y

Caracas

Lima

Montevideo

Guayaquil

Bogotá

Monterrey

Guadalajara

Panama City

Col. Caribbean

San Juan

Quito

San José

Guatemala City

Mexico City

Santiago

Medellín

Buenos Aires

Rio de Janeiro

São Paulo

Cali

-30% -20% -10% 0% 10% 20% 30% 40% 50%

Change in Rents (%)

Percent Change:Class A Avg. Rent

Percent Change:Class AB Avg. Rent


• Rents have continued to fall in most Latin American

cities, prolonging a trend that has been observed since

2015. This is due to high production and

underwhelming demand in much of the region.

• The cities that saw rental increases over the past year

– Mexico City, Santiago, Medellín, Buenos Aires, Rio

de Janeiro, São Paulo, and Cali – can attribute this

mainly to a recovery in the exchange rate since early

2016 / late 2015.

• In Lima a supply glut has led landlords to offer the

lowest rents that the market has seen since 2009.

0% 2% 4% 6% 8% 10% 12%

San Juan

Quito

Montevideo

Guayaquil

Guatemala City

Col. Caribbean

Cali

Buenos Aires

Santiago

Caracas

Guadalajara

Monterrey

Mexico City

San José

Bogotá

Panama City

Lima

Medellín

São Paulo

Rio de Janeiro

15

Average Cap Rate, EY 2016


N/A

N/A

N/A

N/A

N/A

• Cap rates in Latin America are generally between 7-

11%. This is higher than cap rates in the US or

Europe, reflecting added risk premiums in many of

these markets.

• Brazil is showing the highest average cap rates at the

moment, reflecting additional risk at the moment.

• Several cities are listed as “N/A”, as there is too small

a sample of asset purchases to determine a reliable

average cap rate.


N/A

N/A

16

Regional Production and Absorption, 2012-2016

• Latin America saw a fall both in production and net

absorption over 2015 levels, with over 2.4 million m2

of

office delivered, and over 1.4 million m2

of demand.

This has pushed the regional vacancy rate up to 17%.

• Assuming planned projects remain on schedule, JLL

anticipates that over 6 million m2

will be completed

between 2017-2019.

• Office production will peak in 2017, aided most by

Mexico City (800,000 m2), São Paulo (392,000 m

2),

Bogotá (340,000 m2), Rio de Janeiro (306,000 m

2), and

Guadajalara (214,000 m2).

• With many cities at or near their peak supply cycle, low

rents and high vacancy are driving an adjustment in

most cities that will see new supply taper, as fewer

investors will consider potential projects to be profitable

in such a challenging market context.



0%

5%

10%

15%

20%

25%

30%

-

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000

4.000.000

2012 2013 2014 2015 2016 2017 2018 2019V

ac

an

cy

Rate

Ren

tab

le A

rea

(m2)

Production

Net Absorption

Vacancy Rate

Production Forecast

Argentina – Buenos Aires

17

Macroeconomic overview

• In the first three quarters of 2016, Argentina’s GDP fell

2.4% compared with the same period of 2015. The most

affected sectors of the economy in this period were

manufacturing and construction.

• The construction industry was compromised by the

contraction of public works. The Construction Indicator

(ISAC) decreased 13.1% in the first eleven months of

2016, compared with the same period of 2015.

• Inflation in 2016 in CABA reached 34.9% according to

official statistics. Inflation in CABA for the second half of

the year was 8.8% showing signals of a slowing pace.

Private estimations showed an inflation of 40% for 2016.

• The Argentinian peso devalued a 19.5% during the year,

with the exchange rate oscillating between ARS 13.50 /

16.2 per dollar. The local currency managed to stabilize

within this range after the strong adjustment suffered in

late 2015.

Market trends

• Production in 2016 reached 67,000 m2, taking the overall

office stock to 1.4 million m2. Existing class A buildings

represent 45% of the market, whereas class AB spaces

correspond to the remaining 55%.

• Net absorption in 2016 was 92,000 m2, the highest mark

since 2010. Particularly strong movement was noted in

the Catalinas submarkets.

• Vacancy was around 5% for the year, while rents fell by

approximately 2,5% Y-o-Y, on average.

• Over 130,000 m2

are scheduled for completion in 2017,

following a growing trend in new supply as investor

confidence is high.

Office market statistics

Total stock (m²) 1,400,000

Overall vacancy rate 5.00%

Production - 2016 (m²) 67,000

Net absorption – 2016 (m²) 92,000

Expected production – 2017 (m²) 136,000

Expected net absorption – 2017 (m²) 109,000

Class A rental range (USD/m²/mo.) 25-36

Class AB/B+ rental range (USD/m²/mo.) 20-26

Average purchase price range (USD/m²) $4,000 – 4,800

Historic production, absorption, and vacancy


0%

5%

10%

15%

20%

25%

30%

0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

160.000

180.000

200.000

Va

ca

nc

y R

ate

(%

)

Re

nta

ble

Are

a (m

2)

Production

Absorption

Vacancy

Brazil – São Paulo

18


• Brazil is undergoing one of its worst recessions on

record, with GDP contracting over 3.6% Y-o-Y.

• Inflation has fallen to 6.3% Y-o-Y, down from over 10.7% a

year earlier. This has generated optimism, and has

encouraged the Central Bank to cut interest rates by 50

basis points as of December 2016.

• After the impeachment of Dilma Rouseff, vice president

Michel Temer has been sworn in amidst popular unrest,

vowing to get the country back on track. Meanwhile the

‘car-wash’ corruption scandal that began with Petrobras

has now implicated construction giant Odebrecht. The

US department of justice indicted the company with

paying millions of dollars in bribes to win bids on a variety

of projects, including highways in Peru, a port in Cuba,

the Caracas metro, and World Cup infrastructure in Brazil,

among many others.

Market trends

• Vacancy in São Paulo reached 25% in 2016 and is

expected to rise to 28-30% in 2016, a historic mark for the

metropolis, driven by the low level of demand and the

pace at which projects are being delivered.

• Net office absorption fell by 10,000 m2 for the year, a

sharp turn from 2015 when the city saw 200.000 m2 in

absorption. This is due to companies aggressively

downsizing, leading to a glut of vacant space.

• Class A rents have risen 24% from 2015, while AB rents

soared 40% in 2016. This increase is mainly due to the

recovery in the exchange rate after a sharp fall in 2015.

• About 500,000 m2 are expected to be added to the

market from 2017-2019, which will keep vacancy high

and rents low. However new production is expected to

slow down as projects are cancelled in a very challenging

economic context. Low demand is not expected to

recover until 2018.




Production - 2016 (m²) 206,000

Net absorption – 2016 (m²) -10,000








0%

5%

10%

15%

20%

25%

30%

35%

40%

-50.000

-

50.000

100.000

150.000

200.000

250.000

300.000

350.000

400.000

450.000

500.000

Vac

ancy

Rat

e

Re

nta

ble

Are

a (m

2)

Production

Absorption

Vacancy

Brazil – Rio de Janeiro

19


• Brazil is undergoing one of its worst recessions on

record, with GDP contracting over 3.6% Y-o-Y.

• Inflation has fallen to 6.3% Y-o-Y, down from over 10.7% a

year earlier. This has generated optimism, and has

encouraged the Central Bank to cut interest rates by 50

basis points as of December 2016.

• After the impeachment of Dilma Rouseff, vice president

Michel Temer has been sworn in amidst popular unrest,

vowing to get the country back on track. Meanwhile the

‘car-wash’ corruption scandal that began with Petrobras

has now implicated construction giant Odebrecht. The

US department of justice indicted the company with

paying millions of dollars in bribes to win bids on a variety

of projects, including highways in Peru, a port in Cuba,

the Caracas metro, and World Cup infrastructure in Brazil,

among many others.

Market trends

• Overall vacancy in Rio de Janeiro continues its upward

trend, approaching a record level of 31%. This is driven

by high production and low demand. Net absorption in

Rio was very low for the third straight year, as several

companies are downsizing and returning space as a

result of the adverse economic environment.

• Rents increased by 17% on average Y-o-Y for Class A

assets, while class AB buildings saw the rents go up 23%.

This increase is mainly due to the recovery in the

exchange rate after a sharp fall in 2015.

• The market dynamic is not likely to change in 2017,

although there is a chance of a currency devaluation. The

market will likely recover in 2018 when the economy

improves and tenants have more incentives to occupy

new corporate spaces.



Overall vacancy rate 31%

Production - 2016 (m²) 228,000



Expected net absorption – 2017 (m²) -50,000






0%

5%

10%

15%

20%

25%

30%

35%

40%

-

50.000

100.000

150.000

200.000

250.000

Vac

ancy

Rat

e

Re

nta

ble

Are

a (m

2)

Production

Absorption

Vacancy

Chile - Santiago

20


• During the final quarter of 2016 the Chilean economy

experienced its first annual contraction since 2009

despite an improvement in copper prices.

• Following the release of weaker-than-expected economic

data, the Central Bank has opted to cut rates by 25 basis

points in order to provide further stimulus to the economy

and at the same time provide support for the exchange

rate to the US dollar. The economy should improve in

2017, buoyed by these policies as well as improving

external conditions.

• As low prices for copper and other commodities have

hurt government revenue, the current administration´s

must now commit to reducing the fiscal deficit.

• Consumer prices decelerated further during last year to

2.7%, which is the lowest value since 2013. Nonetheless,

as the economy is expected to pick up steam in 2017,

reducing spare capacity and pushing up prices.

Market trends

• Total production for the year was approximately 110,000

m2, consistent with most previous years with the

exception of 2014.

• Demand was strong in 2016, reaching 138,000 m2,

although below 2015 levels. The vacancy rate has been

falling over the last three quarters and finished the year at

8.7%. Delays in key projects have kept the market

relatively tight.

• Falling vacancy is giving landlords more leverage.

Average asking rents in the Class A segment, expressed

in Unidades de Fomento (UF) exhibited a decrease of 5%

throughout the year, reaching UF 0.57/m2/month. (US$

22.5/m2/month). A decrease of 4.2% in average asking

rents of Class AB was observed reaching UF

0.45/m2/month (US$ 17.7 /m

2/month). Multinational

tenants will find Santiago more attractive as long as the

peso remains weak against the US dollar.




Production - 2016 (m²) 110,000









0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-

50.000

100.000

150.000

200.000

250.000

300.000

350.000

400.000

2008 2009 2010 2011 2012 2013 2014 2015 2016

Vac

ancy

Rat

e

Re

nta

ble

Are

a (m

2)

Production

Absorption

Vacancy

Colombia - Bogotá

21


• The fall in hydrocarbons and mining revenue, followed by the

subsequent depreciation of the exchange rate and a chronic

fiscal and trade deficit, have obligated the government to

devise a comprehensive tax reform in order to address these

ailments.

• President Santos suffered a stunning defeat in a referendum on

the peace deal signed with the FARC guerilla movement to end

Latin America´s longest running armed conflict. This prompted

his administration to make concessions to the leaders of the

“no” movement, and pass the resulting deal through Congress.

The agreement goes into effect in 2017, though without popular

approval.

• The 4G infrastructure program continues to move ahead,

improving first and second-generation highways as well as

airports, railways, and ports. The program aims to substantially

improve Colombia’s competitiveness, however recent fiscal

woes will likely postpone many of the projects.

Market trends

• The Bogotá market saw its second highest production year on

record, with 249,000 m2

delivered to the market. This should

continue 2018 and 2019, however it is forecasted to return to

normal levels afterwards.

• Demand was strong in 2016, driven by many companies

upgrading, expanding, or consolidating. Tenants are taking

advantage of favorable rents to shift to newer buildings with

more efficient ownership structures. These factors, along with

notable public sector consolidations, drove strong net

absorption of 199,000 m2.

• Class A rents have begun to fall in local currency due to high

prevalence of Class A projects in lower-priced submarkets like

Salitre and Eldorado, while Class AB rents have kept steady

during 2016. This has led to a closing gap between average

rents in the two asset classes. When stated in USD, rents have

stabilized along with the COP/USD exchange rate.




Production - 2016 (m²) 247,000




Class A rental range (USD/m²/mo.) 17 – 28

Class AB/B+ rental range (USD/m²/mo.) 13 - 21




0%

5%

10%

15%

20%

25%

30%

-

50.000

100.000

150.000

200.000

250.000

300.000

350.000

400.000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Vac

ancy

Rat

e

Re

nta

ble

Are

a(m

2 )

Production (m2)

Net Absorption (m2)

Vacancy

Forecast

* Assuming exchange rate of COP 3000 / 1 USD

Colombia - Medellín

22


• The fall in hydrocarbons and mining revenue, followed by

the subsequent depreciation of the exchange rate and a

chronic fiscal and trade deficit, have obligated the

government to devise a comprehensive tax reform in

order to address these ailments.

• President Santos suffered a stunning defeat in a

referendum on the peace deal signed with the FARC

guerilla movement to end Latin America´s longest

running armed conflict. This prompted his administration

to make concessions to the leaders of the “no”

movement, and pass the resulting deal through

Congress. The agreement goes into effect in 2017,

though without popular approval.


improving first and second-generation highways as well

as airports, railways, and ports. The program aims to

substantially improve Colombia’s competitiveness,

however recent fiscal woes will likely postpone many of

the projects.

Market trends

• Medellín saw its highest production and absorption on

record in 2016, as years of pent up demand prompted a

significant supply response.

• Production peaked in 2016 with the delivery of several

Class A buildings in the El Poblado submarket. In the

coming years the pipeline will slow down a bit and

vacancy should fall back down to between 5-8%.

• Medellín is a highly segmented market. Tenants typically

either occupy small areas of less than 250 m2, or – in the

case of large domestic companies - over 2,000 m2.

However the intermediate market is beginning to appear

as the city and market evolve. Institutional funds are

beginning to eye Medellín, looking to capitalize on the

growing intermediate demand. New projects are

increasingly owned by these funds rather than being pre-

sold.


Total stock (m²) 718,000


Production - 2016 (m²) 97,000




Class A rental range (USD/m²/mo.) 12 - 19






0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-

20.000

40.000

60.000

80.000

100.000

120.000

140.000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Vac

ancy

Rat

e

Re

nta

ble

Are

a (m

2)

Production

Absorption

Vacancy Forecast


Colombia - Cali

23




Production - 2016 (m²) 16,000


Expected production – 2017 (m²) 0








• The fall in hydrocarbons and mining revenue, followed by

the subsequent depreciation of the exchange rate and a

chronic fiscal and trade deficit, have obligated the

government to devise a comprehensive tax reform in

order to address these ailments.

• President Santos suffered a stunning defeat in a

referendum on the peace deal signed with the FARC

guerilla movement to end Latin America´s longest

running armed conflict. This prompted his administration

to make concessions to the leaders of the “no”

movement, and pass the resulting deal through

Congress. The agreement goes into effect in 2017,

though without popular approval.


improving first and second-generation highways as well

as airports, railways, and ports. The program aims to

substantially improve Colombia’s competitiveness,

however recent fiscal woes will likely postpone many of

the projects.

Market trends

• Building area permits fell by nearly 75% from 2015 levels,

indicating a fall in investor confidence and a bearish real

estate market.

• Cali saw the delivery of two Class A buildings in 2016 that

added 16,000 m2 to the market. Demand was very

responsive to this, registering 22,000 m2 of net

absorption.

• Production will slow to a crawl in the coming years, as the

only project under construction at the moment is

Zonamerica, a replica of the successful Free Trade Zone

in Montevideo, Uruguay.

• JLL expects the market to tighten significantly, as few

options for expansion will drive rents up. By the end of

2017, Cali could see vacancy fall as low as 3%.

-5%

5%

15%

25%

35%

45%

(5.000)

5.000

15.000

25.000

35.000

45.000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Vac

ancy

Rat

e

Ren

tab

le A

rea

(m2 )

Production (m2)

Absorption (m2)

Vacancy (%) Forecast


Colombia – Barranquilla (and Caribbean)

24




Production - 2016 (m²) 45,000




Class A rental range (USD/m²/mo.) 12 - 22





• The fall in hydrocarbons and mining revenue, followed by the

subsequent depreciation of the exchange rate and a chronic

fiscal and trade deficit, have obligated the government to

devise a comprehensive tax reform in order to address these

ailments.

• President Santos suffered a stunning defeat in a referendum on

the peace deal signed with the FARC guerilla movement to end

Latin America´s longest running armed conflict. This prompted

his administration to make concessions to the leaders of the

“no” movement, and pass the resulting deal through Congress.

The agreement goes into effect in 2017, though without popular

approval.


improving first and second-generation highways as well as

airports, railways, and ports. The program aims to substantially

improve Colombia’s competitiveness, however recent fiscal

woes will likely postpone many of the projects.

Market trends

• The relatively new market of Colombia´s Caribbean region –

which includes the cities of Barranquilla, Cartagena, and Santa

Marta – has grown significantly over the past few years.

Investment activity has exploded due to the signing of several

free trade agreements and the expansion of the Panamá Canal

– all of which, it is thought, will benefit this cluster of port cities.

• Thus far demand has failed to live up to expectations. Nearly

90,000 m2

of new supply have been completed in the past two

years, but with only 30,000 m2

of net absorption.

• The vacancy rate has skyrocketed to over 30% - the second

highest in the region. This has not yet affected rents, as Class

A landlords hold out for demand.

• The supply cycle appears to have hit its peak in 2016, as

production will diminish in the next few years.

0%

5%

10%

15%

20%

25%

30%

35%

40%

-

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Vac

ancy

Rat

e

Re

nta

ble

Are

a (m

2 )

Production

Absorption

Vacancy Rate


Forecast


Costa Rica - San José

25


• Costa Rica saw a robust recovery in 2016, thanks to strong

exports and lower oil prices. These factors boosted terms of

trade and freed up disposable income for households.

• The implementation of a Virtual Tax Administration program

has cut down drastically on tax evasion, helping the

government to reduce its budget gap in 2016. This will

reduce debt payments and pressure on interest rates.

• There is some concern in Costa Rica about the potential for

renegotiation of the Central American Free Trade Agreement

CAFTA) with the United States. If this becomes a reality, it

could hurt the Costa Rican manufacturing sector, a pillar of

the national economy.

• Inflation for the year was 0%, far below the Central Bank´s

target rate. Interest rates will be frozen for the year to

stimulate inflation.

Market trends

• San José is an important hub for manufacturing and

business process outsourcing (BPO). Accordingly, 42% of

the office market is concentrated in Free Trade Zones and

72% is contained in enclosed business and/or industrial

parks.

• 62,000 m2

of office space were delivered in 2016, a slight

decrease from 2015. Production should be higher in 2017,

with 80,000 m2

of area expected to be completed.

• San José was one of only a handful of cities to see demand

outpace supply this year, with 68,000 m2

of net absorption.

• Vacancy has fallen moderately over the past year. JLL

expects that vacancy will continue its gradually fall over the

medium term as the local economy is recovering;

furthermore we believe Costa Rica is not at significant risk of

losing considerable trade flows with the US despite political

rhetoric.




Production - 2016 (m²) 62,000









0%

5%

10%

15%

20%

25%

30%

-

20.000

40.000

60.000

80.000

100.000

120.000

140.000

Va

ca

nc

yR

ate

Ren

tab

le A

rea

(m2)

Production (m2)

Absorption (m2)

Vacancy (%)

Forecast

Ecuador - Quito

26


• The coastal city of Manta was hit by a magnitude 7.8

earthquake in April. Much of the city was destroyed, leaving

nearly 700 casualties and thousands injured and homeless.

• Ecuador has been one of the countries hardest hit by the fall

in commodities – particularly oil, which accounts for the

majority of export earnings. Its use of the US dollar has

further hurt the economy, as many extractive and

agricultural exports are now comparatively more expensive

than those from competing countries like Colombia and

Peru, whose currencies recently devalued.

• Falling export revenues and generous government spending

in an election year combined to severely strain the

government´s budget. The fiscal deficit reached a worrying

6% of GDP in 2016.

Market trends

• The Quito office market is highly fragmented, with 64% of

the stock characterized as strata title. Another 20% is

occupied by the public sector – one of the highest

proportions in the region.

• Production reached a record of 132,000 m2 in 2016, as

several iconic projects such as Ekopark, Metropolitan, and

Titanium Plaza hit the market at the same time. Demand

also reached a historic peak of 80,000 m2, though this

resulted in a rise in vacancy from 4% a year ago to over 12%

today as supply was still much higher.

• Rents have generally fallen over the past year and should

continue to do so in the short term as landlords become

more competitive.

• The Ecuadorean government has committed to an

ambitious plan of consolidating all government ministries

into campuses known as Government Platforms that will be

rolled out beginning in 2017. While this should greatly

enhance public sector productivity, they risk flooding the

market as several buildings currently occupied by ministries

will be vacated.




Production - 2016 (m²) 132,000









0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-

20.000

40.000

60.000

80.000

100.000

120.000

140.000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Vac

ancy

Rat

e

Ren

tab

le A

rea

(m2

)

Production

Absorption

Vacancy

Forecast

* Ecuador data has changed since 2015 due to a

reclassification of the market

Ecuador - Guayaquil

27


• The coastal city of Manta was hit by a magnitude 7.8

earthquake in April. Much of the city was destroyed,

leaving nearly 700 casualties and thousands injured and

homeless.

• Ecuador has been one of the countries hardest hit by the

fall in commodities – particularly oil, which accounts for

the majority of export earnings. Its use of the US dollar

has further hurt the economy, as many extractive and

agricultural exports are comparatively more expensive

than those from competing countries like Colombia and

Peru, whose currencies devalued recently.

• Falling export revenues and generous government

spending in an election year combined to severely strain

the government´s budget. The fiscal deficit reached a

worrying 6% of GDP in 2016.

Market trends

• Production was up slightly Y-o-Y over 2015 levels, with

38,000 m2 delivered to the market. Approximately 85,000

m2

are expected to be completed by 2019.

• Demand was 28,000 m2, representing a 30% fall from

2015.

• Vacancy has risen slightly over the past year, from 6.4%

in 2015 to 7% today. This is mostly due to new projects

that have large areas vacant still.

• Rents fell by nearly 5% Y-o-Y, reflecting a slowdown in

demand.




Production - 2016 (m²) 38,000







Stock Distribution and Submarkets


La Puntilla

4%

Urdesa10%

Centro38%

Kennedy48%

* Ecuador data has changed since 2015 due to a

reclassification of the market

Guatemala – Guatemala City

28


• The Guatemalan economy has seen steady growth for

the past few years, albeit at a slowing pace. In 2016 the

economy grew by 3.4%, and it is expected to stay around

3-5% in the medium term.

• Guatemala is likely to be one of the countries most at risk

by protectionism and immigration reforms in the United

States. Remittances, which will be severely cut if

immigration becomes more difficult, are responsible for

10% of GDP. Meanwhile Guatemala is part of the Central

American Free Trade Agreement (CAFTA) and could see

different economic activities scaled back if the United

States begins to raise tariffs on Guatemalan products.

• The massive 2015 corruption scandal that resulted in the

imprisonment of former president Otto Perez Molina

ushered into power Jimmy Moreno, a comedian with no

prior political experience. His election illustrates a

widespread popular distrust of the political class at the

moment.

Market trends

• The largest project to be delivered in 2016 was Avia, a

Class A building in the Reforma submarket. Also

completed was a new headquarters for Banrural.

• Guatemala City has the lowest rents of any market in the

western hemisphere due to low demand and the

presence of BPO and call center operators, who establish

sites in Guatemala City precisely to capitalize on low

costs.

• Class A buildings rent for between $9-11/m2/month while

Class AB buildings lease for as low as $6-9/m2/month.

• The ongoing economic recovery in the United States has

had positive spillover effects to the Guatemala market,

contributing to the 12,000 m2 of absorption seen this year.




Production - 2016 (m²) 16,000







Stock Distribution and Submarkets


Americas24%

Proceres43%

Reforma25%

Others8%

Mexico – Mexico City

29


• The Mexican economy grew 2.3% in real terms during

2016, a slowdown from previous years, though still well

above the Latin American average.

• The economic outlook has deteriorated as the IMF

forecasts 1.7% growth for 2017. The election of Donald

Trump and his proposed protectionist policies could hurt

Mexico by restricting the inflows of investment and

commerce. Potential border taxes and the NAFTA

renegotiation are two topics that will be closely watched.

• The current restrictive US monetary policy has generated

an interest rate hike in Mexico, as well as a slowdown on

the outflow of capital from the nation. On the other hand,

inflation has risen mainly in response to a sliding peso

during 2016. Inflation is expected to surpass 4%, the

upper level of the target range set by the Bank of Mexico.

• Bond rating agencies have grown pessimistic on

Mexico´s sovereign bond rating in light of a rising debt-

to-GDP ratio and economic uncertainty. While a

downgrade is possible in 2017, Mexico would still remain

investment grade.

Market trends

• Mexico City continues to be Latin America´s largest and

fastest growing office market, with approximately 445,000

m2

of space delivered to the market in 2016. Between

2017 – 2019, over 1,400,000 m2 will be completed –

roughly the size of the entire corporate stock of Buenos

Aires.

• Mexico City saw the highest level of demand for the

region during 2016 with 296,000 m2.

• Vacancy has risen Y-o-Y from 12% in 2015 to 13% in

2016.

• Rents saw a 2% increase in the Class A segment, while

Class AB rents have fallen 10% Y-o-Y.




Production - 2016 (m²) 445,000






Average purchase price range (USD/m²)$2,500 –

6,600



0%

10%

20%

30%

40%

50%

60%

-

50.000

100.000

150.000

200.000

250.000

300.000

Vac

ancy

Rat

e

Re

nta

ble

Are

a(m

2 )

Availability

Net Demand

Vacancy Rate

Mexico - Monterrey

30





















investment grade.

Market trends

• Monterrey is perhaps the city most at risk if Donald Trump

delivers on his protectionist rhetoric, due to its booming

manufacturing sector with strong trade ties to the United

States.

• Net absorption fell slightly from 68,000 m2

in 2015 to

64,000 m2

in 2016.

• Vacancy fell from 18% in 2015 to 16% this past year.

However with over 200,000 m2

in the production pipeline,

it is likely that Monterrey will see a hike in vacancy and a

continued fall in rents.




Production - 2016 (m²) 67,000







3,500

Stock, Absorption, and Vacancy by Submarket


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

-

50.000

100.000

150.000

200.000

250.000

300.000

350.000

400.000

450.000

Country Centro/Obispado

SantaMaria/

SanJeronimo

Valle ValleOriente

Vac

ancy

Rat

e

Re

nta

ble

Are

a(m

2 )

Stock

Net Absorption

Vacancy (%)

Mexico - Guadalajara

31





















investment grade.

Market trends

• Net absorption was 22,000 m2

during last year, nearly

doubling the level of demand seen in 2015.

• However, with 73,000 m2

delivered to the market, supply

dwarfed demand and pushed the vacancy rate up from

9% to over 20%. With approximately 325,000 m2

expected to be completed by 2019, vacancy should

continue to climb.

• Rents have been stable through 2016. As the

Guadalajara market is relatively small, there has been little

pressure on landlords to lower rents.




Production - 2016 (m²) 73,000







3,500

Stock, Production, and Vacancy by Submarket


0%

10%

20%

30%

40%

50%

60%

70%

-

20.000

40.000

60.000

80.000

100.000

120.000

140.000

Americas Lopez Mateos Puerta deHierro

Vallarta

Vac

ancy

Rat

e

Re

nta

ble

Are

a(m

2 )

Stock

Under Construction

Planned

Vacancy Rate

Panamá – Panamá City

32


• Panamá´s economy remains one of the fastest growing in

Latin America, however it has slowed since several high

profile infrastructure projects reached completion, including

the expansion of the Panamá Canal and the construction of

the Panamá City Metro.

• Foreign Direct Investment has continued to grow over the

past years and should continue on that path.

• Inflation slowed to 0.7% in 2016, as Panamá is a net importer

of most goods and extractive materials.

• Panamá 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.

Panamá earns considerable foreign investment by being a

financial “safe haven,” thus the CRS could undermine its

status as a global financial hub. Last year´s scandal

surrounding the Panamá Papers has led nations around the

world to further pressure Panamá to adapting the CRS, and

this could have important long-term implications.

Market trends

• Panamá has one of the world´s highest vacancy rates, as

speculative investment in office buildings has left 550,000 m2

– or nearly 40% of the market – vacant.

• Panamá has already reached the peak of its production

cycle, and new supply has been declining since 2014. 2016

saw the introduction of another 146,000 m2

to the market with

demand reaching 132,000 m2. The downward trend in new

supply will allow vacancy to fall over the foreseeable future.

• 2016 saw one of the highest levels of demand on record,

mostly driven by rents that have crashed, in some cases to

$15/m2/month for Class A buildings. The Obarrio submarket,

plagued by stifling traffic, has suffered the most while Costa

del Este has generally maintained high rents and high

demand.




Production - 2016 (m²) 146,000









0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

-

50.000

100.000

150.000

200.000

250.000

300.000

Vac

ancy

Rat

e

Re

nta

ble

Are

a (m

2)

Production (m2)

Absorption (m2)

Vacancy Rate (%) Forecast

Perú - Lima

33


• Despite falling commodity prices, Peru´s economy grew

by 3.4% in 2016 thanks to significant growth in the

mining sector as well as countercyclical fiscal measures

intended to boost private consumption.

• Expanding access to credit and wage increases

suggests that domestic demand and discretionary

spending should be strong in the short term. The Central

Bank has cut reserve requirements for banks with the

goal of further stimulating the slowing demand for credit.

• The election of the centrist Pedro Paulo Kuczynski – a

politician with extensive experience in the private, public,

and non-profit sectors - has further entrenched Latin

America´s recent turn to the right. The “PPK”

administration will prioritize growth with a focus on

investing in infrastructure, education, and health care.

• The scandal surrounding the Brazilian construction giant

Odebrecht has implicated former presidents Alejandro

Toledo and Ollanta Humala, who are accused of

accepting millions in campaign contributions in

exchange for infrastructure contracts.

Market trends

• Lima is one of Latin America´s most active real estate

markets at the moment. An office boom has reached its

peak in 2016, delivering 330,000 m2

to a market that has

quickly become oversupplied.

• High production has led to fast-rising vacancy rates. The

city vacancy rate, just 2 years at 4%, has now reached

20%. This has pushed rents down to their lowest point

since 2009.

• Office demand has fared well and exceeded

expectations. Low rents have stimulated a record

190,000 m2

of net absorption.

• The market is highly segmented with core submarkets

like San Isidro remaining stable but new submarkets like

Magdalena showing a vacancy rate near 50%.




Production - 2016 (m²) 330,000









0%

5%

10%

15%

20%

25%

30%

35%

40%

-

50.000

100.000

150.000

200.000

250.000

300.000

350.000

400.000

Vac

ancy

Rat

e

Re

nta

ble

Are

a (m

2)

Production (m2)

Net Absorption (m2)

Vacancy RateForecast

Puerto Rico – San Juan

34


• Puerto Rico´s decades-long economic contraction

continued in 2016. High operational costs and the

expiration of export tax credits have made the island

highly uncompetitive, resulting in high unemployment

and a monumental debt burden.

• Puerto Rico defaulted on a debt payment of

approximately USD $1 billion, leaving governor Ricardo

Rosello having to negotiate with the US Congress for

relief or restructuring. Without a bailout, the Puerto

Rican government contends that they will run out of

cash in 2017, leaving hospitals, schools, police forces,

and many others without means to finance themselves.

To add to the complexity of the issue, $15 billion of the

$70 billion in debt is owned by Puerto Ricans via

pensions and other investment funds. Therefore a

default would be a significant blow to the middle class.

• The US Congress created a commission to resolve the

island’s crisis and put it back on a track to financial

sustainability. The committee will oversee austerity

measures and has veto power over the governor of

Puerto Rico.

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

11%) and higher for Class B (19%) and Class C (30%).

• The market continues to be tenant-favorable. Investors,

users, and corporate clients are taking advantage,

using sub-leases and early contract re-negotiations.

• 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.




Production - 2016 (m²) 0

Net absorption – 2016 (m²) -12,000

Expected production – 2017 (m²) 0

Expected net absorption – 2017 (m²) -8,000





*Rents in San Juan are typically quoted in ft2, but are stated in m2 in this report for

consistency and comparative purposes.

0%

5%

10%

15%

20%

25%

(40.000)

(30.000)

(20.000)

(10.000)

-

10.000

20.000

30.000

Vac

ancy

Rat

e

Re

nta

ble

Are

a(m

2)

Production (m2)

Absorption (m2)

Vacancy

Forecast


Uruguay - Montevideo

35


• In the third quarter of 2016, Uruguay´s economy

expanded 2.0% Y-o-Y. The acceleration was driven by

an improvement in both domestic demand and the

external sector.

• Private consumption showed an increase of 0.7%

compared to the previous quarter.

• In Q3 2016 the economy showed a deceleration of fixed

investment, mainly due to the fall of the public

construction activity. Nevertheless, private investment

saw considerable growth.

• Exports and imports saw contrasting performance in

2016. While exports increased due to the higher

external demand for food products, imports registered

a decline of 0.2% - mainly as a result of lower imports

for intermediate goods, a fall in fuel prices, and a drop

in outbound tourism.

Market trends

• During the last ten years, the office market in Uruguay

has shown a stable but slow dynamic in terms of stock

growth.

• In 2016, there was no new production and net

absorption reached 7,500 m2.

• Vacancy continued to show a decreasing trend. In

2016 the vacancy was in the range of 8-12%. On the

other hand, rents registered a very wide range.

• Class A/AB rents reached USD 22-30/m²/month. Free

Trade Zones (FTZ) rents ranged from USD 18-

45/m²/month.

• Production is expected to rise, particularly in

Montevideo´s Free Trade Zone market.




Production - 2016 (m²) 0







4,100

Evolution of Rents


0

5

10

15

20

25

30

35

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

US

D/m

2/m

onth

Class A Avg

Class B+ Avg

Venezuela - Caracas

36


• According to independent analysts, the Venezuelan economy

contracted by approximately 9.3% in 2016, making it one of the

worst performing economies in the world.

• The fall in oil prices, which account for over 90% of Venezuelan

exports, has devastated government balances, putting social

programs in jeopardy and exacerbating the shortage of dollars

available for exchange. The scarcity of dollars has made it

difficult to import goods or inputs, leading many companies to

simply cease operations in order to not lose money. This has

driven runaway inflation that surpassed 500% by the end of

2016.

• Amid widespread shortages and an economic catastrophe, the

ruling party has doubled down on its policies and rhetoric,

accusing its opponents of engaging in an “economic war” and

using this as a pretext to consolidate power. Government

bodies such as the Electoral Council and the Supreme Court

are being used to institutionalize the ruling party´s power and

suppression of the opposition.

Market trends

• The economic crisis is provoking considerable real estate

investment, as people and businesses would rather invest their

money in real estate than store it in the banking system where it

would be eroded by inflation.

• Production reached 30,000 m2

in 2016 and looks poised to

grow over the next few years as several large projects will be

completed, including Centro Empresarial La Esmeralda (70,000

m2), Paseo la Castellana (20,000 m

2), and Oasis Los Ruices

(26,000 m2).

• Net absorption for 2016 was 25,000 m2, a slight increase over

2015 levels.

• The northeast suburbs of Los Ruices and Boleita are

increasingly consolidating, as low value industrial land is

redeveloped for office use.




Production - 2016 (m²) 55,000




Class A rental range (USD/m²/mo.) 20-35*

Class AB/B+ rental range (USD/m²/mo.) 18-30*

Average purchase price range (USD/m²) $2,000 – 6,500*

Annual GDP Growth and Inflation


-400

-200

0

200

400

600

800

-10%

-5%

0%

5%

10%

15%

20%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 CP

I In

flat

ion

, Yo

-o-Y

An

nu

al G

DP

Gro

wth

GDP Pct. Growth

CPI, year end

* Assuming parallel exchange rate of VEF 3,700 / 1 USD

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

$140-210)

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)


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




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

Appendix: Comparison of tenant leasing practices


38

Costa Rica Ecuador Mexico Panamá

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


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


lease)

No No (unless an option to renew is

agreed at the outset and


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


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


and payable monthly in advance

Service Charges-

Common Areas



Payable by landlord

(via tenant service

charge)




service charge)

Service Charges-

Building Insurance

Payable by landlord Payable by landlord Payable by landlord (via


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






39

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


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


renew is agreed at the


the lease)

No (unless an option to renew

is agreed at the outset and



renew is agreed at


lease)

Yes, renewal term depends on

previous tenure

Basis of Rent

Increases or Rent

Review



percentage of CPI



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

build-out; 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


charge and payable

monthly in advance



advance


charge and payable

monthly in advance



advance

Service Charges-

Common Areas








service charge)

Service Charges-

Building Insurance

Payable by landlord Payable by landlord (via




Payable by landlord

Sub-letting &

Assignment


landlord approval)


landlord approval)


landlord approval)


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,


and tear



Original condition,


and tear





Contacts:

Latin America:

Northern Cone, Central America, Caribbean

Scott Figler

Senior Consultant

[email protected]

http://latinamerica.am.joneslanglasalle.com

Want more information?

40

Brazil

Ricardo Hirata

Head of Research, Brazil

[email protected]

http://www.joneslanglasalle.com.br

Latin America:

Southern Cone

Martin Potito

Associate Director, Latin America

[email protected]


Mexico

Gabriela Morales Fernandez

Market Research Manager, Mexico

[email protected]

http://www.joneslanglasalle.com.mx

Chile

Felipe Acevedo

Associate Director, Chile

[email protected]



mailto:[email protected]





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