Buenos Aires Premium Office Space, prices, and the areas that are the most sought after
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The AAA office market did not suffer the decline of the general real estate market in Buenos Aires so the demand for office space remains strong. What are the projects under development? Prices and areas most sought after by companies
The office market continues to produce positive results, as opposed to the housing crisis that has been raging through the country since last year. Low levels of vacancy, income values that are strong – especially in premium corporate projects – with good profitability, generate a framework that seduces the main commercial developers in real estate.
Mariana Stossl, a market researcher at the Newmark Grubb Bacre, provides a summary of the current landscape of Class A offices: with approximately 2.256 million square meters total stock in this category, there are 1,445 million of profitable square meters, a value that is 30% below regional average and represents a vacancy of 7%. This limited stock and reduced vacancy make the rental values remain stable, averaging USD 27.23 (per m2) for the whole city. The areas with the most demand are the area of Catalinas-Retiro, followed by the Libertador Corridor and the Polo Dot, in General Paz and Panamericana.
While “every electoral year creates uncertainty, generating greater market volatility and a brake on activity, incomes continue at high levels despite the devaluation, with high occupancy levels giving the business greater predictability. As sale prices have not dropped, a search should be more focused to spot opportunities,” advises Stossl.
Rafael Valera, senior broker at the consultancy Cushman & Wakefield said, “the vacancies are relatively constant and prices had a slight decline among the most affected buildings, the most important buildings are located in the Microcenter submarkets, 9 de Julio, Catalinas, and the Panamericana”.
According to the data of this consultancy, during the first quarter of the year the vacancy in this market is 6.7%. This represents 87,595 m2 of availability, a figure that is 6.2% higher than the previous quarter.
As for the negotiation process for new properties, Valera warned that “they are taking longer, with tenants and in return, owners are more flexible than in earlier times.” About the rental price, the exchange rate crisis produced a decline. The most affected were the corridors of 9 de Julio (-10,3%) and Panamerican (-7,7%), and Catalinas-Plaza Rome (-5,4%), according to Cushman’s.
Juan Pablo Gutierrez, broker specializing in corporate offices, considers that the market is in the process of adjustment as the combination of economic recession, devaluation and, fundamentally, political uncertainty, have had a negative impact on the daily development of operations in the sector. This means that there are two well-defined lines: that of the market of companies whose core business is in domestic consumption, which resulted in some decreases in space or renegotiation of values downward; and the second line, those companies that became more cost-effective and efficient and therefore more profitable, with advanced processes of improvement in their spaces, or expansion, consequently taking more metres. Although it is clear that in order to continue growing, they need more space, political uncertainty generates delays in decision making.
While Gutierrez agrees that this year’s presidential elections have been complex, “in this period real estate corporate decisions have to consider whether as of 11 December ideas of exchange rate freezes will prevail or not, of restrictions on exports or imports or not, for example. Clearly, these strong uncertainties tend to reduce significantly activity in this market. In the face of a possible renewal of the business-friendly mandate, demand will start to capitalise with concrete actions and should this happen, from October there will be an upturn in activity and prices.”
New Developments
About three lots bought at state auctions on Madero Avenue at 1085, 1105 and 1185, Consultatio will build Catalinas Río, 150,000 m2 of mixed-use that will be the largest in the country with an investment of USD 400 million.
They will offer floors from 2,000m2 to 5,000 m2. It will be 102 subdivisible and flexible semi-floors with different possibilities of configuration. There will be two towers: the North which will have 30 floors and the South 23 floors. The work will be done by the US studio SOM, responsible for, among other works, the One World Trade Center at Ground Zero in New York. Excavation work will begin in July of this year and there will be 46 months of construction work.
In this regard, Gonzalo de la Serna, CFO of the company led by Eduardo Costantini, argues: “This land allows the development of a model project that captures the new paradigms of workspaces, with larger floor plates facilitating circulations and common spaces of hierarchy.”
Regarding the market situation, De la Serna says that “investment in offices, considered as an asset class, has offered an attractive diversification opportunity for investment portfolios. Factors such as dollarized incomes and some long-term stability in securities have allowed it to be established as an attractive product for investors who want to diversify financial investments into the real economy. In this sense, investment in higher income locations, such as the Catalinas area, poses a lower risk for historically low and stable vacancy levels.”
Among those consulted, Pablo Kiesel, manager Raghsa’s commercial, says its portfolio of offices “always had fewer vacancies than the general market”, adding: “We had great periods with all our 100,000 m2 fully rented. We’re very content with the commercialization of the Libertador Business Centre (CEL), which will be operational by January 2020 and we are, for the time being, able to rent 40% of the 60,000 m2 area. Likewise, with the completion of the Paseo del Bajo, we are optimistic that our offices in Puerto Madero will be quickly rented.” Meanwhile, Héctor Salvo, general manager of the same company, says that they have a vacancy of less than 2%.
The CEL involves an investment of around USD 200 million (plus the cost of the land) and it’s going to be finished in order this year, at which point they estimate to reach 70% of the rented area to be rented. It is an office building for rent in Nunez area where the new office hub is located. There are 26 floors of up to 2,900 m2 with panoramic views over the river and the city. In addition, they expect to earn a Leed Core & Shell certification in the Gold Category.
In addition to the CEL – there are three projects that will mark a turning point in the market: Torre Catalinas of IRSA, Dique Norte and Lumina San Isidro.
As Valera detailed, Torre Catalinas “is a state-of-the-art project designed for the ideal corporate product according to the needs of today’s companies. North Dique is to be delivered in the coming months, overlooking the river, it is located metres from the Catalinas. Meanwhile, Lumina is a large-scale complex with a significant corporate presence that will certainly bring a boost in the North Zone business community.”
Particularly Catalinas Tower, as it is known, IRSA is proceeding at a firm pace with the construction of these AAA offices – located 200 m from Della Paolera of 35,000 m2. As for Polo Dot, they have already completed the first stage of the masterplan: a building of 32,500 m2 of offices (with floors of 1,300 m2 to 1,900 m2), 300 garages and a park. The work involved the redevelopment and expansion of the former Philips factory, some 58,650 m2 of covered area.
In total, Polo Dot Office Park plans to develop 115.150 m2 of offices. Pending ventures include: construction of the Giga buildings -15,050 m2 of ground floor offices and eight floors (with two levels of garages); the connection with the Dot shopping mall – known as the Herradura – which will offer 8,000 m2 of offices and 6,500 m2 of the commercial area; and two other towers (Exa and Vedia). The first of these last two buildings will include the construction of a 30-story structure (two levels of garages) 26,600 m2 for corporate use, while for the other, they propose to remodel and expand another part of the former Philips plant, 27 floors, with 33,000 m2 for offices.
Gutierrez also highlighted Lumina’s work “for his volumetry and design” and provided more details: it is a development of Leed corporate offices of 40,000 m2 profitable on a property of four hectares in San Isidro, very close to Dardo Rocha Street, to the Panamerican Highway and the Unicenter shopping.
In the Retiro area, developer Argencons is proceeding with the construction of a mega mixed-use project: District Quartier. This includes an AAA office building – Plaza – that will consist of 35,000 m2 of offices with the largest open floors in the city from 3,600 m2 per floor, divisible by up to six 600 m2 units each. It will be 9 floors, which they aim to certify sustainability under the Leed regulations and promise to “incorporate state-of-the-art technology.” There will also be a retail area, a roof-top rest bar, parking for 500 vehicles and bicycles, and will have changing rooms.
Carlos Spina, commercial manager of this company, notes: “The market is structurally sub-offered after years of chronic under investment. In that line, it is a business that is more than safe from any economic crisis. This is an excellent, medium to long-term investment that practically triples housing profitability. Yes, the investment was slowed, obviously. But in our case we were able to trade in quantity and price as budgeted.”
A Vision of the future
Juan Querol, a broker at Cushman & Wakefield, comments that “the economic outlook – coupled with the current political context – make companies postpone their plans for expansion and demand for meters of offices until there is greater certainty of the way forward.
Depending on how healthy demand is, we’re going to be able to see a direct impact on the prices of the market. For companies that are looking for large areas for rental, this can be considered as an opportunity, as one finds in the Microcenter sub-market.”
Kiesel argues: “We are optimistic because we have an interesting demand, companies that don’t shrink, or that are consolidating have even more space requirements. The real estate business is long-term and decisions should not be made based on the immediate situation but thinking ahead for four or five years.”
On upcoming projects, he adds: “We are always looking with the expectation of finding good lots with large dimensions of scale in a good location.
Today we are focused on finishing the construction and commercialization of the Liberator Business Centre and we are working with our team on the design of a new tower of offices on the Nunez site purchased from AABE, on Av. Del Libertador y Campos Salles, a project of 75.000 m2.
As for the new areas to be developed for the corporate market, the commercial manager of Raghsa considers: “This new option we believe will be Núñez, not only for our ventures, which will involve approximately 100,000 m2 of rentable space but also due to the future Innovation Park that will totally change the dynamics of this neighborhood”.
Source: La Cronista
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