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Bogotá, Colombia
Office Market Overview | Latin America | EY 2017
Contents
Introduction 3
Market Snapshots
Argentina – Buenos Aires 19
Brazil – São Paulo 20
Brazil – Rio de Janeiro 21
Chile - Santiago 22
Colombia - Bogotá 23
Colombia - Medellín 24
Colombia - Cali 25
Colombia - Barranquilla (and Caribbean) 26
Costa Rica – San José 27
Ecuador - Quito 28
Ecuador - Guayaquil 29
Guatemala – Guatemala City 30
Mexico – Mexico City 31
Mexico – Monterrey 32
Mexico – Guadalajara 33
Panamá – Panamá City 34
Peru - Lima 35
Puerto Rico – San Juan 36
Uruguay - Montevideo 37
Venezuela - Caracas 38
Appendix: Tenant Lease Practices 39
Contacts 42
3 Office Market Overview | Latin America | EY 2017
Introduction
Location
Location Map
Map
Santiago
Montevideo
Caracas Buenos
Medellin Rental Aires
Rents
Growth Falling Colombia
Slowing Caribbean
Buenos
Aires
Monterrey Guadalajara
Rental Rents
Growth Accelerating Bottoming Bogotá
Cali Out
Quito, Panama City,
San Juan, Guayaquil
Introduction
2017 was a year that highlighted Latin America’s economic potential, but also underscored its weaknesses. On one hand, the
region saw record office absorption, driven by strong performance in fast-growing cities like Bogotá, Santiago, and Lima, as
well as second-tier markets like Quito and San José. These cities are examples of maturing real estate markets driven by
growing domestic companies, multinationals establishing or increasing their presence, and the influx of institutional capital on
the supply side. On the other hand, the massive Odebrecht corruption scandal, a tenuous near-impeachment in Perú, and the
worsening political and economic crisis in Venezuela highlight the need for stronger and more independent institutions.
The past year saw a definitive move to the political center in Argentina and Brazil, where Mauricio Macri and Michel Temer
continue to pass controversial but necessary reforms that could improve the fiscal outlook of their respective countries.
Chileans elected to bring Sebastian Piñera back to power, rejecting the populism of Alejandro Guillier. One of the more
resounding victories for democracy in the region was the political about-face of Lenin Moreno, whose cooperation with
corruption investigations led to him ousting his own vice-president as well as successfully passing a referendum that upholds
presidential term limits, effectively ending any possibility of a return to power for his predecessor and former mentor, Rafael
Correa. In Colombia the FARC registered as a political party for the first time, albeit controversially, choosing to test their merit
politically rather than through violence. 2017 also seems to have marked the nadir of the economic cycle in many countries.
Argentina, Brazil, Chile, Colombia, Ecuador, Guatemala, Panama, Peru, and Uruguay are expected to see an economic recovery
beginning in 2018 as commodity prices and export markets rebound, and household consumption continues its upward
trajectory.
Yet critical tests loom in 2018. The region’s 3 most populous countries – Brazil, Colombia, and Mexico – face important elections
that will set the political tone for the region. Mexico, perhaps the nation facing more uncertainty than any other in the region
amidst the protectionist wave in the US, will choose whether or not to counter with populism and protectionism of its own in the
form of Andres Lopez Obrador. In Brazil, a country that has seen its political class come under heavy scrutiny in the aftermath of
the “Lavo Jato” scandal, the two leading candidates are Luis “Lula” da Silva, the former president who is currently under
investigation, and the far right candidate Jair Bolsonaro, the self-proclaimed ”Donald Trump of Brazil,” who is positioning
himself as a political outsider and the only candidate untainted by scandal. Colombia, meanwhile, faces an election that could
be a referendum on its hard fought peace agreement with the FARC. Voters will most likely choose between far-right candidate
Ivan Duque, who is against the agreement, Gustavo Petro, the far-left former mayor of Bogotá, and center-left candidate Sergio
Fajardo, the former mayor of Medellín and governor of Antioquia.
Whatever happens politically, Latin American countries will continue to prioritize developing infrastructure and achieving
economic diversity. Most are investing record levels in new highways, ports, airports, urban transport, telecommunications,
sanitation, and other infrastructure networks, which will be critical to creating more sustainable and diverse economies that are
less vulnerable to shocks in the global economy. Also critical for the future will be investments in human capital, particularly
education and health care. Yet if 2017 has taught us anything, it may be that much of the significant investments that are
happening in these areas could be squandered in the absence of strong and independent institutions.
JLL Research
5 Office Market Overview | Latin America | EY 2017
• Several Latin American countries have one large city that the most widely distributed populations. Each contains
accounts for a significant share of the national population. several cities with over one million inhabitants.
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
6 Office Market Overview | Latin America | EY 2017
$2.500
$20.000
Real GDP, Billions of USD - PPP
$15.000
$1.500
$10.000
$1.000
$5.000
$500
$- $0
Mexico
Santiago
Lima
Caracas
Quito
Uruguay
Brazil
Venezuela
Ecuador
Guatemala City
Panama
Costa Rica
Mexico City
Argentina
Chile
Guayaquil
San Jose
Montevideo
Puerto Rico
Colombia
Bogota
Peru
Sao Paulo
Monterrey
Buenos Aires
Cali
Barranquilla
Panama City
Medellin
Guatemala
San Juan
Rio de Janeiro
Guadalajara
• Brazil and Mexico by far have the largest economies in • 2018 is expected to be the beginning of a recovery trend
Latin America. The countries with the highest GDP per for the region. Some countries like Brazil and Argentina
capita are Puerto Rico, Chile, Uruguay, and Panama. have seen a stronger recovery in 2017 while others that are
• Growth in Latin America is expected to be positive for the more commodity-dependent have seen a slower recovery.
first time since 2014, as many countries are emerging from
the aftermath of low commodity prices.
7 Office Market Overview | Latin America | EY 2017
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
Avg. Growth, 2010-2015
Avg. Growth, 2016-2017
-10% 2018 Forecast
-12%
• Most Latin American economies thrived between 2010- • 2016 and 2017 brought an economic slowdown to most
2015. During this period, in the aftermath of the 2008 countries, precipitated by falling commodity prices, rising
Financial Crisis, high commodity prices and increasingly debt, and political instability.
stable political systems lifted millions out of poverty and • 2018 will bring a recovery for most Latin American
strengthened the middle class. This attracted an influx of countries, with the exception of Puerto Rico and
investment into Latin America, attracted by high returns Venezuela.
and growing markets.
8 Office Market Overview | Latin America | EY 2017
40%
35%
Argentina
30%
25%
Policy Interest Rate, Q4 2017
20%
15%
Brazil
10%
Mexico
5%
Colombia
Peru
Chile
U.S.A.
0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
• Interest rates were generally low between 2012-2015. most major Latin American Central Banks raised interest
During this time most major Latin American governments rates to combat this.
sought to capitalize on relatively cheap credit to issue • Interest rates were also hiked to stabilize exchange rates
bonds for infrastructure development. and control inflation during this period.
• Beginning in 2015, the threat of U.S. interest rate hikes left • Since 2016, interest rates have mostly fallen with the
Latin American countries with the prospect of massive exception of Mexico, Argentina, and the US.
capital outflows, as more investment would presumably
be rerouted into U.S.-based investments. In response,
9 Office Market Overview | Latin America | EY 2017
Mexico City
São Paulo
Santiago
Bogotá
Rio de Janeiro
Lima
Panama City
Buenos Aires
Monterrey
Caracas
San José
Medellín
Quito
San Juan
Guatemala City
Guayaquil
Guadalajara
Col. Caribbean
Montevideo
Cali
• Mexico City and São Paulo remain as the two largest office • It is worth keeping in mind that Latin American office
markets in Latin America. Combined, both of them sum markets are still very young. Only 6 cities would rank
over 11 million m2 of rentable area, more than one third of within the top 40 US cities in terms of office stock. In
the entire region’s stock. several cities a large percentage of the total stock is less
• Bogotá, Lima, Monterrey and Medellín are markets that than 5 years old.
are expanding fast as economic performance in those
countries improve.
10 Office Market Overview | Latin America | EY 2017
Panama City
Rio de Janeiro
Col. Caribbean
São Paulo
San Juan
Lima
Guadalajara
Monterrey
Bogotá
Mexico City
Medellín
San José
Montevideo
Guatemala City
Caracas
Quito
Santiago
Guayaquil
Buenos Aires
Cali
• Panamá City and Barranquilla continue to have some of the • Cali has the lowest vacancy rate among major Latin American
highest vacancy rates in the region. Both cities have seen office markets, standing at 3.5%, followed by Buenos Aires and
excessive levels of real estate investment based on expectations Guayaquil. Limited new supply in these cities is driving vacancy
of economic growth that have exceeded reality. down.
• Rio de Janeiro saw vacancy shoot to 37%, placing it second- • JLL considers 8-12% vacancy to be within the “market
highest in the region. This is due to Brazil’s recession but also equilibrium” range, meaning neither the tenant nor the landlord
from fallout from the Lavo Jato investigation, which is causing has considerable leverage in negotiations. About half of the 20
many implicated companies to lay off many workers or close cities tracked in this report – including many of Latin America’s
completely. largest cities - show vacancy that is above the equilibrium range.
11 Office Market Overview | Latin America | EY 2017
Santiago
San José
Quito
San Juan
Guayaquil
Buenos Aires
Cali
Montevideo
Medellín
Caracas
Guatemala City
Col. Caribbean
Guadalajara
Panama City
Monterrey
Lima
São Paulo
Bogotá
Mexico City
Rio de Janeiro
• Rio de Janeiro saw the largest one-year increase in vacant • Santiago and San José saw vacant area fall in the past
area in the region. Significant downsizing combined with year. Limited new supply and very strong demand led to a
over 180,000 m2 of new completions were the culprit. net reduction of vacant area in these cities.
• Bogotá and Mexico City have seen a surge in vacancy, as
new production is added to the market. The Colombian
capital in particular is reaching new all-time highs in terms
of new supply.
12 Office Market Overview | Latin America | EY 2017
Mexico City
Bogotá
Lima
Rio de Janeiro
Monterrey
São Paulo
Quito
Panama City
Guadalajara
Santiago
San José
Col. Caribbean
Guatemala City
Buenos Aires
Medellín
Guayaquil
Caracas
Cali
Montevideo
San Juan
• Mexico City observed the highest production level in the production in the last year. The case of the Puerto Rican
region, with nearly 550,000 m2 of new leasable area in office market is telling, since they are still dealing with a
2017. deep recession and the effects of Hurricane Maria. Cali
• Bogotá, with 311,000 m2 of new production, is riding the and Montevideo have simply not had much demand.
peak of a production boom that is expected to last until • Overall, the region appears to be near the end of a
2019 and will add 550,000 m2 more to the market over the production peak that has pushed up vacancy in most
next two years. cities.
• Cali, Montevideo and San Juan have not registered new
13 Office Market Overview | Latin America | EY 2017
Mexico City
Bogotá
Santiago
Lima
Quito
São Paulo
San José
Panama City
Guadalajara
Monterrey
Medellín
Buenos Aires
Guatemala City
Guayaquil
Caracas
Col. Caribbean
San Juan
Montevideo
Cali
Rio de Janeiro
• Mexico City (327,000 m2), Bogotá (185,000 m2), Santiago • São Paulo office market had negative demand in 2016,
(146,000 m2) and Lima (141,000 m2) had the strongest and in 2017 managed to have positive absorption amidst
levels of demand in the region. one of the worst recessions in Brazil’s history.
• Quito, Ecuador saw its highest annual net absorption in • Rio de Janeiro was the only city that had negative
history. A key factor behind this is the completion of new demand in 2017 due to widespread downsizings. The
Government Platforms, massive buildings meant to difficult economic situation in the country seems to be
consolidate several ministries and associated entities affecting Rio more than other cities in Brazil.
under one roof.
14 Office Market Overview | Latin America | EY 2017
Bogotá 24%
Guadalajara 127%
Santiago 10%
Lima 14%
Monterrey 17%
Caracas 16%
Medellín 24%
Quito 22%
Panama City 8%
Guayaquil 22%
1% Production, 2018-2020
Rio de Janeiro
• The largest production pipeline can be found in Mexico Both are relatively limited markets that are going through
City. Over 1,1 million m2 are expected to be delivered by supply booms.
2020, with an astonishing 818,000 m2 to be delivered in • Panama City, Colombia Caribbean (Barranquilla), and
2018 alone. Many of these are buildings that were Lima are poised for a significant drop-off in office
expected to be completed in 2017 but were delayed. production. Each of these cities has gone through supply
• Guatemala City and Guadalajara will see the largest booms over the past few years that have driven vacancy to
expansion of their markets relative to the current stock. historic levels.
15 Office Market Overview | Latin America | EY 2017
Buenos Aires
* Quoted asking rents in
Caracas * Caracas are mainly
theoretical, as most
São Paulo companies must pay in local
currency.
Montevideo
Rio de Janeiro
Mexico City
Santiago
Bogotá
Panama City
Monterrey
Cali
Medellín
San José
Lima
Average Rent
Class A
San Juan
Col. Caribbean
Guayaquil
Guatemala City
• Latin America’s most expensive city for office rents at this centers and other companies looking to optimize on their
moment is Buenos Aires. Argentina’s economic recovery operating costs.
and new leadership have many companies feeling • Brazil’s two largest cities remain relatively expensive
optimistic about their plans there. This combined with despite historically high vacancy.
limited supply is driving rents up. • Rents in Caracas, when priced in USD, are relatively high.
• Latin America’s cheapest city for leasing an office is However there are very few tenants who are able to pay
Guatemala City. The top buildings here are leasing at rent in dollars, so this comes with a significant caveat.
between USD $11-12/m2/month, which is attracting call
16 Office Market Overview | Latin America | EY 2017
Buenos Aires
Bogotá
Guatemala City
San José
Montevideo
Lima
San Juan
Caracas
Cali
Mexico City
São Paulo
Panama City
Guayaquil
Quito
Col. Caribbean
Rio de Janeiro
• Rents have begun to rise in most Latin American markets, last year, as exchange rates stabilize in these countries.
reverting a downward trend observed since 2015. This • São Paulo and Rio de Janeiro are among the markets that
shows that demand is beginning to catch up with supply had the sharpest fell in rents in 2017, as the harsh
in the region, despite increased production observed in economic environment has pushed vacancy upwards and
the last few years. landlords have been forced to reduce rents.
• Guadalajara, Monterrey, Medellín, Santiago and Buenos • Rents in Lima and San Juan have remained stable
Aires observed the steepest increase in rents during the between 2016 and 2017.
17 Office Market Overview | Latin America | EY 2017
Lima
Mexico City
Bogotá
Medellín
Rio de Janeiro
São Paulo
Buenos Aires
Santiago
Monterrey
Caracas N/A
Guadalajara N/A
Quito N/A
Guayaquil N/A
Cali N/A
Montevideo N/A
• Capital markets are very underdeveloped in Latin America • Peru has the widest cap rate range at the moment,
outside of Mexico and Brazil. Therefore cap rate reflecting the fact that capital markets are beginning to
approximations are often made based on a small sample gain more traction here but there is little consensus
size. among investors on this point.
• Cap rates in Latin America are generally between 6-12%. • Several cities are listed as “N/A”, as there is too small a
This is higher than cap rates in more developed real estate sample of asset purchases to determine a reliable cap rate
markets in US or Europe, reflecting added risk premiums range.
in many of these cities.
18 Office Market Overview | Latin America | EY 2017
3.000.000 20%
Production Forecast
Net Absorption
18%
14%
2.000.000
12%
Rentable Area (m2)
Vacancy Rate
1.500.000 10%
8%
1.000.000
6%
4%
500.000
2%
- 0%
2012 2013 2014 2015 2016 2017 2018 2019
• Overall, the region saw a decrease in production in 2017, Bogotá, São Paulo, Guadalajara, Santiago, Buenos Aires
totaling 2.2 million m2 of production. Several markets are in and Lima along will combine for 1,5 million m2 of new area.
the declining side of a production boom that begun a few However this historical high is also due to surprisingly high
years ago. Demand, on the other hand, rose to 1,8 million totals from places like Guatemala City and Quito, which will
m2 across Latin America, an increase of over 20% on 2016. If see record office production next year.
all projects are delivered as forecasted, JLL expects that • Production looks poised to fall significantly in 2019. This
over 4 million m2 will be completed between 2018 and drop-off can be attributed to several cities reaching
2019. adjustments in their real estate cycles like Lima, Panama
• Office production will have its peak in 2018, as Mexico City, City, Rio de Janeiro, São Paulo, and Mexico City.
19 Office Market Overview | Latin America | EY 2017
180.000
Market Trends
25%
160.000
Vacancy Rate (%)
Rentable Area (m2)
0 0%
20 Office Market Overview | Latin America | EY 2017
Market Trends
500.000 30%
• Production reached 127,000 m² for the year.
Developers are delaying deliveries amidst the current 450.000
climate of economic uncertainty and high vacancy 400.000 25%
Rentable Area (m2)
rates.
Vacancy Rate
350.000
• Net absorption totaled 111,000 m², which is good 20%
considering the circumstances; however absorption 300.000
fell short of the 5 year average of 138,000 m2. 250.000
• Vacancy closed at 24.95% for 2017, and it is expected 15%
200.000
to grow throughout 2018, as approximately 250,000 m²
150.000
will be added to the market next year. 10%
• Rental prices remained stable along the year. Prime 100.000
areas are observing faster recovery than other 50.000 5%
segments of the market.
0
-50.000 0%
21 Office Market Overview | Latin America | EY 2017
150.000 25%
• Net absorption was negative for 2017, reaching -73,500
m². This is due to the current recession as well as 100.000
20%
company downsizings and closings in the aftermath of 15%
the Lavo Jato scandal. 50.000
• Vacancy during last year reached 37%. A discreet 10%
recovery is expected in 2018, but the market will take 5%
0
time to balance itself.
• Rental prices kept falling in the city, influenced by the 0%
-50.000
high availability of vacant stock. Class A asking rents -5%
have fallen to USD $28/m²/month on average.
-100.000 -10%
22 Office Market Overview | Latin America | EY 2017
Chile - Santiago
Market Trends
Production Absorption Vacancy
• Production in 2017 totaled 64,000 m², the lowest figure
since 2009 and 62% less than forecasted at the 400.000 30%
beginning of the year. This can be explained by the
delay in delivery of five buildings, representing about 350.000
25%
126,000 m² of new supply. It is expected that these
become operational in 2018. 300.000
Rentable Area (m2)
Vacancy Rate
0 0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
23 Office Market Overview | Latin America | EY 2017
Colombia - Bogotá
Market Trends
Production Absorption Vacancy
• Production in 2017 reached 311,000 m², the highest
amount on record for the Bogotá office market. The 350.000 30%
current production peak should last through 2019 and Forecast
the market will come to an adjustment thereafter. 300.000
• Net absorption for the year reached 185,000 m², 25%
20%
movements, which we estimate to account for over 200.000
70,000 m2 of net absorption in 2017.
15%
• Given that production outpaced demand for the 4th
150.000
straight year, vacancy climbed to almost 16%. Vacancy
should continue to climb through 2019 and revert back 10%
100.000
to normal levels by 2020.
• WeWork alone was responsible for about 20,000 m² of 5%
50.000
absorption in 2017, equal to over 10% of total market
demand. This highlights the growing importance of co-
- 0%
working spaces in the market.
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
24 Office Market Overview | Latin America | EY 2017
Colombia - Medellín
140.000
Vacancy Rate
Colombia - Cali
Market Trends
Production Absorption Vacancy
Forecast
Uruguay. 60.000
• Demand fell throughout 2017, reaching 7,500 m².
Leasing has been fairly strong in Jardin Plaza and 50.000 15%
World Trade Center, two bellweather projects in the
40.000
tiny Cali market, which could signal that there is a
10%
pent-up demand waiting for quality product. 30.000
• As a result of slow supply, vacancy fell across the
20.000
market, reaching an all-time low of 3,49%. Cali is 5%
currently the city with the lowest vacancy in Latin 10.000
America.
- 0%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
26 Office Market Overview | Latin America | EY 2017
Market Trends
Production Absorption Vacancy
30%
• Production reached 56,000 m², an all-time high in the
Vacancy Rate
70.000
Colombia Caribbean submarket. The majority of this 60.000
25%
came in the Buenavista submarket in the city of
Barranquilla. 50.000 20%
• 2017 marks the end of the production boom observed 40.000
15%
since 2015, as the market now enters its rebalancing
30.000
phase. Most of the production over the next two years 10%
will happen in Cartagena, as Barranquilla’s pipeline 20.000
will slow to a trickle. 10.000
5%
• Demand so far has not kept up with production,
absorbing 28,000 m² in 2017. As a result, vacancy - 0%
reached an historic high of 34%. ‘ 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
27 Office Market Overview | Latin America | EY 2017
Ecuador - Quito
Market Trends
Production Absorption Vacancy
- 0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
29 Office Market Overview | Latin America | EY 2017
Ecuador - Guayaquil
Market Trends
Production Absorption Vacancy
140.000
20%
one of the highest totals in the city’s history. JLL
Vacancy Rate
120.000
expects absorption to remain strong in 2018.
• The current pace of supply is allowing demand to 100.000 15%
absorb new developments, pushing vacancy down 80.000
across the market. Guayaquil’s vacancy rate is 10%
60.000
currently at 5.2%, one of the lowest in Latin America.
40.000
5%
20.000
- 0%
2012 2013 2014 2015 2016 2017
30 Office Market Overview | Latin America | EY 2017
20%
leasing for between USD $10-12/m2/month. These
Vacancy Rate
80.000
prices have attracted many call centers who are
15%
looking to optimize their operational costs.
60.000
• The most dynamic suburbs are Proceres and the
newly consolidated Vista Hermosa; over 70% of the 10%
40.000
production pipeline is concentrated in these two
submarkets. 20.000 5%
- 0%
31 Office Market Overview | Latin America | EY 2017
Mexico - Monterrey
350.000
20%
compared with the previous year, which has helped to
Vacancy Rate
300.000
prop up vacancy. The vacancy level advanced to 19%
in 2017, corresponding to 247,000 m². Valle Oriente 250.000 15%
and Valle submarkets contain most availability. 200.000
• Due to Monterrey’s location near the US border and 10%
150.000
industrial base that is highly integrated with cross-
border trade, a renegotiation of NAFTA will likely have 100.000
5%
a stronger effect on Monterrey than any other major 50.000
city in Mexico.
- 0%
Country Centro/ Santa Valle Valle
Obispado Maria/ Oriente
San
Jeronimo
33 Office Market Overview | Latin America | EY 2017
Mexico - Guadalajara
50%
Vacancy Rate
Puerta de Hierro, with 37,000 m². Overall, rents have 80.000 30%
kept steady during 2017. However, as new buildings
become operational, this could put pressure on prices 60.000
20%
for the next two years.
40.000
10%
20.000
- 0%
Americas Lopez Mateos Puerta de Vallarta
Hierro
34 Office Market Overview | Latin America | EY 2017
Perú - Lima
Market Trends
Production Absorption Vacancy
• Net absorption in 2017 was 142,000 m², down from the 20%
Vacancy Rate
Market Trends
Class A Class AB
• During 2017, the San Juan office market continued 300.000
its trend of general inactivity, aside from some
closings and reductions. Some companies are taking
250.000
advantage of the current market and leaving behind
Rentable Area (m2)
50.000
0
Caparra Guaynabo Hato Rey Other
37 Office Market Overview | Latin America | EY 2017
Uruguay - Montevideo
10
0
2016
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2017
38 Office Market Overview | Latin America | EY 2017
Venezuela - Caracas
Rent Units USD/m²/month R$/m²/month (Brazilian Unidades de Fomento (UF), a COP/m²/month (Colombian Pesos)
Real) quasi-currency adjusted daily
according to the local CPI. For
more information visit
www.bcentral.cl
Deposit/Guarantee Case-by-case (typically Bank guarantee / guarantor Case-by-case (typically 1-3 Insurance policy typically requested
2-3 months depending / secure bail months’ rent)
on tenant)
Statutory Right to No (unless an option After 5 years per Brazilian No (unless an option to renew is Yes; length of renewal term typically
Renew to renew is agreed at law. agreed at the outset and specified in lease
outset and specified in specified in the lease)
lease)
Basis of Rent Case-by-case, explicit Annual increase of CPI. In UF, indexed daily Annual increases of CPI + (0% - 3%)
Increases or Rent indexation by CPI is After 3 years or upon
Review prohibited by law. renewal, the parties gain
the right of rent review, to
bring it back to market
rates
Rent Free Period 1-3 Months Case-by-case, often 1-3 Case-by-case, often 1-3 months 1-3 Months
months
Car Parking City: 1 per 100 m² A & AB Buildings - 1:35 m² UF 3-4.5/unit/month (US $140- 1 per 50 m²
Province: 1 per 60 m² 210)
Service Charges- Additional to rental Additional to the rental Additional to the rental charge Additional to rental charge, payable
Mgmt. Fees charge and payable charge and payable and payable monthly in monthly
monthly in advance monthly in advance advance
Service Charges- Payable by landlord Additional to the rental Payable by landlord (via tenant Payable by landlord (via tenant
Common Areas (via tenant service charge and payable service charge) service charge)
charge) monthly in advance
Service Charges- Payable by landlord Payable by landlord (via Payable by landlord (via tenant Payable by landlord
Building Insurance tenant service charge) service charge)
Sub-letting & Normally yes (subject Case by case Normally yes (subject to Normally yes (subject to LL
Assignment to landlord approval) landlord approval) approval)
Early Termination After 6 months, 1.5 Normally tenant pays 3 Non typically in this market Tenant is responsible for entirety of
months of rent month of rent penalty, however they can negotiated. contract unless otherwise
penalty; After 1 year, 1 reduced in proportion to Termination after year 3 of the stipulated in contract. Termination
months of rent penalty the elapsed time of the term with a penalty of 6 or 12 after year 3 with a 6 month rent
contract. months´ rent is not uncommon. penalty is typical.
Tenant Original condition, Original condition or case Original condition Original condition, allowing for
Reinstatement allowing for normal by case normal wear and tear
Responsibilities wear and tear
40 Office Market Overview | Latin America | EY 2017
Typical Lease Term 3-5 Years 3-5 years 3-5 Years 3-5 Years
Deposit/Guarantee Case-by-case, insurance Case-by-case (typically Typical deposit is two months Case-by-case, insurance policy
policy covering the 2-3 months) rent covering the contract is typical
contract is typical Not customary to have
insurance covering contract.
Basis of Rent Case-by-case, though CPI + (0% - 3%) US Consumer Price Index, Case-by-case, though typically
Increases or Rent typically some indexed unless rent quoted in Pesos, some indexed percentage of CPI
Review percentage of CPI then Mexican Consumer Price
Index
Rent Free Period Usually only the time for 1-3 Months Case-by-case Case-by-case, typically 1-3 months
the build out (about 2
months)
Car Parking 1 per 25-50m², depending 1 per 50 m² 1 per 30 m² 1 per 55 m², though newer
on submarket buildings offer more parking
Service Charges- Additional to the rental Additional to rental Tenant responsible, additional Additional to the rental charge and
Mgmt. Fees charge and payable charge, payable to the rental charge and payable monthly in advance
monthly in advance monthly payable monthly in advance
Fixed rate base on pro-rata
share Reconciled annually
Service Charges- Payable by landlord (via Payable by landlord (via Payable by landlord (via tenant Payable by landlord (via tenant
Common Areas tenant service charge) tenant service charge) service charge) service charge)
Service Charges- Payable by landlord Payable by landlord Payable by landlord (via tenant Payable by landlord
Building Insurance service charge)
Sub-letting & Normally yes (subject to Normally yes (subject to Not customary and always Normally yes (subject to landlord
Assignment landlord approval) LL approval) subject to Landlord approval for approval)
both subleasing and
assignment
Early Termination Legally tenants can exit Tenant is responsible Negotiable (with termination Unless otherwise stipulated in the
after the first year without for entirety of contract fees) rental contract, tenant is
penalty. To avoid this LL unless otherwise responsible for paying entirety of
can demand fully stipulated in contract contractual obligation.
bondable lease
agreements.
Tenant Original condition, Original condition, Original condition, allowing for Original condition, allowing for
Reinstatement allowing for normal wear allowing for normal normal wear and tear normal wear and tear
Responsibilities and tear wear and tear
41 Office Market Overview | Latin America | EY 2017
Deposit/Guarantee Case-by-case, usually 2 Case-by-case, though it is Case-by-case, typically 6 Case-by-case, insurance policy
months rent are required typical to 12 months backed by covering the contract is typical
bank guarantee or cash
deposit (depending on
tenant)
Statutory Right to No (unless an option to No (unless an option to renew is No (unless an option to Yes, renewal term depends on
Renew renew is agreed at the agreed at the outset and renew is agreed at outset previous tenure
outset and specified in the specified in the lease) and specified in lease)
lease)
Basis of Rent Case-by-case, though Case-by-case, though typically Case-by-case, generally Case-by-case, though often
Increases or Rent typically some indexed some indexed percentage of CPI adjusted using Consumer indexed as some percentage of
Review percentage of CPI Price Index CPI
Rent Free Period Case-by-case, typically 1-3 Case-by-case, typically 1-6 Case-by-case Typically 1-3 months for the
months. While this often months. While this often occurs, build-out; 2 months is most
occurs, it is not it is not standardized in Lima common
standardized in Lima and is and is usually dependent on
usually dependent on tenant improvement allowances
tenant improvement provided.
allowances provided.
Car Parking US $150-200/space/month Paid separately; typically Included in rent if 1 space per 20-35 m²
depending on submarket $80/month for surface lots and building has parking
$100/month for covered space spaces, additional
contract is necessary
otherwise
Service Charges- Additional to the rental Additional to the rental charge Additional to the rental Additional to the rental charge
Mgmt. Fees charge and payable and payable monthly in charge and payable and payable monthly in advance
monthly in advance advance monthly in advance
Service Charges- Payable by landlord (via Payable by landlord (via tenant Payable by landlord (via Payable by landlord (via tenant
Common Areas tenant service charge) service charge) tenant service charge) service charge)
Service Charges- Payable by landlord Payable by landlord (via tenant Payable by landlord (via Payable by landlord
Building Insurance service charge) tenant service charge)
Sub-letting & Normally yes (subject to Normally yes (subject to Normally yes (subject to Normally yes (subject to landlord
Assignment landlord approval) landlord approval) landlord approval) approval)
Early Termination Case-by-case charming Unless otherwise stipulated in Case-by-case Legally tenants can exit after the
the rental contract, tenant is first year without penalty. To
responsible for paying entirety avoid this, LL can demand fully
of contractual obligation. bondable lease agreements.
Tenant Original condition, allowing Original condition, allowing for Original condition, Original condition, allowing for
Reinstatement for normal wear and tear normal wear and tear allowing for normal wear normal wear and tear
Responsibilities and tear
42 Office Market Overview| Latin America | EY 2017
Contacts:
Brazil Chile
Eduardo Miyamoto Alison Ewert
Head of Research, Brazil Consultant, Chile
Eduardo.Miyamoto@am.jll.com Alison.Ewert@am.jll.com
http://joneslanglasalle.com.br http://latinamerica.am.joneslanglasalle.com
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