Buenos Aires is the regional leader in new office projects
Between 2019 and 2023 there will be more than 800,000 square meters premium space built, which is a figure similar to what was built in Lima in the past five years, according to Cushman & Wakefield.
At a regional level, Buenos Aires is the city that has more square meters of offices available projected to be built over the next five years, indicated a study by Cushman & Wakefield.
To put that in perspective, the size of the office market between each of the cities, the ratio of square meters of offices for every 1,000 inhabitants was analysed.
From this, it turned out that Buenos Aires has the highest deficit of premium office space, with a ratio of 96. Leading the ranking is Santiago de Chile, with 234, followed by Bogotá with 167; Lima, with 161, and San Pablo, with 151.
“The number of office buildings that are in a city is used to measure and understand the amount of investment in fixed assets. The long-term requirements that a country has, and the conditions of the financial sector, since intensive capital investments have a great dependence on it, “said Herman Faigenbaum, director General of Cushman & Wakefield Southern Cone.
The study shows that Santiago de Chile has a premium office inventory of 1,670,000 m2, which exceeds that of Lima, Bogotá and Buenos Aires, because it is a market that offers very good long-term investment conditions. This translates into good accessibility to funding sources and a stable market, which is the main attraction for this type of investment.
In addition, Chile has a very solid savings system based on the AFPs, which can be invested locally, which brings more traction to the long-term asset demand, according to the report.
However, this solid savings system implies an entrance barrier for foreign capital, which added to that, the return on investment in intensive capital buildings is still very low, which limits market growth and make investors search for other foreign markets with similar conditions to the local one.
The reverse, he clarified is Lima which is currently positioned as one of the better markets for new offices in emerging markets in South America, behind Santiago de Chile, consolidated at a continental level.
Peru has doubled its office inventory in the last five years, reaching 1.58 Million m2. A consistent economic policy, with rates of relatively low funding costs, favoured long-term investment, Said Cushman.
Bogota shows a similar development to Lima. The Class A office inventory recorded a growth of 87% in the past five years, up to 1,430,000 m2 with the difference that it registered a very good performance of office demand in 2018, driven in a context of strong economic growth.
San Pablo and Lima leads in built meters and Buenos Aires leads in projected meters. Between 2014 and 2018, San Pablo and Lima were the cities that had the highest level of new office construction, followed by Bogotá and Santiago.
Buenos Aires was left behind, not only by the political and economic conditions but also because the financing for long-term investments is very scarce, he raised in the report.
“Buenos Aires has the largest volume of meters under development and projected for the next five years, which validates the potential of the office market for developers.
However, while it has the most projected amount, it has to be noted it has the least produced, caused by the difficulties that investors have to carry out their projects in a market without funding, ” said Karina Longo, Cushman market research Manager & Wakefield Southern Cone.
In observing the market cycle, Buenos Aires is in a state of high income with an average of USD 33 m2/month, which is preserved in part by the small size of the inventory of premium offices.
However, political and economic instability is impacting the level of income, which could begin to decline and poses future opportunities for tenants.
Bogota presents a fall in rents, with an average of USD 20.2 m2/month that is ideal for tenants who must renew their contracts shortly or are looking for rental properties.
Santiago’s markets, which has an average income of USD 19.5 m2/month, Sao Paulo, with an average of USD 23.6 m2/month, and Lima, with an average of USD 17.3 m2/month, have rents growing, so in the future should favor investors.
Source: La Cronista