bogota office rent report q4 2010
DESCRIPTION
Analisys of Bogota's business offices marketTRANSCRIPT
Americas Research
Bogota, Colombia Office Report Year-end 2010
Economic Outlook
On June 20, 2010, after two presidential terms of Álvaro Uribe, Juan Manuel Santos was elected president in a run-off election. He won 69% of the vote (the highest number in the history of the Colombian democracy). Santos inherited an economy that continues to improve thanks to the appropriate policies.
GPD growth for 2010 is estimated at 4.5%. This increase was driven by domestic demand, predominantly household consumption (mainly durable goods). As for the economic sector, activities that contributed most to GDP were manufacturing and mining (oil and coal mining). Other contributors, on a lesser level, were Services and Trade.
With the inflation controlled (2.4%), and close to the lower band (target bands fixed between 2% and 4%), inflation expectations remain low. The relatively low inflation rate is explained in part by the interruption of trade with Venezuela, which increased the domestic supply. On the other hand, the appreciation of the peso (which impacts by reducing the price of traded goods), and the existence of idle capacity, also contributed to reduce inflationary pressures.
Regarding the external sector, according to data from July to August 2010, exports increased both in volume and value (36% and 16% respectively), compared to the same period of previous year. Coffee, coal, ferronickel and oil accounted for 66% of foreign sales in that period. Among the main destinations are USA, China, Netherlands, Canada and Dominican Republic.
In terms of total imports, between July and August, a 23% increase was registered versus the same period of previous year. This increase was primarily due to higher purchases of consumer goods (durables and intermediate goods for industry).
Within this context, we can say that in 2010 the Colombian economy returned to a growth path similar to its historical average, without having committed the inflation target. For 2011 it is expected that the economy will expand between 3.5% and 5.5%.
Market Summary
The economic recovery in Colombia that began in 2009 has continued to impress in 2010. Most believe the stability brought by former President Uribe will remain under the new president, strengthening investor confidence and facilitating investment decisions. As a consequence, office space absorption has been strong – especially for top quality assets – and demand is expected to increase over the next 2 years.
The current stock of Class A & AB office product approximates 1,500,000 m² in 103 buildings. 85% of this stock is located in the CBD and northern areas of the city, with the remainder found in El Salitre, the city’s newest submarket, located along the main thoroughfare to the international airport.
Class A vacancy in the CBD dropped significantly in the past few months (from 10% to 5%) and limited product will enter the market in the short-term. As a result, prices are increasing slightly and will continue to do so as vacancy decreases. Class AB spaces – recent smaller buildings with good corporate image but small floor plates and lack of international standard equipments – constitute the main offer in the CBD. Average rents for Class A product currently range between US$30 – US$35 /m² /month and for Class AB product between US$24 – US$29 /m² /month.
The situation is slightly different in El Salitre, where most of the future supply is being developed and/or planned. Due to its secondary location and lack of consolidation, demand is lower and vacancy is higher than in the CBD; prices are therefore expected to remain stable or decrease slightly as new supply enters the market. Currently, rents range between US$25 – 30 /m² /month.
Economic Data Colombia Country Population (‘000) 46,043 Bogotá Population (‘000) 7,467 Unemployment Rate (%) 11.8% GDP (%) 4.5% GDP (US$ Bn) 268.1 GDP per capita (US$) 9,092 Inflation per annum (%) 2.4% Exchange Rate (Pesos per USD) 1,863 Latin Business Index 6th Sources: Banco de la República; Departamento Administrativo Nacional de Estadística; IMF.
Americas Research
Pulse • Q4
2.20%1.50%
0.80% 1.00%
8.00%8.50%
8.00%
0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%
0200,000400,000600,000800,000
1,000,0001,200,0001,400,0001,600,0001,800,0002,000,000
2005 2006 2007 2008 2009 2010 2011f
Vac
ancy
Rat
e
US$/ m2/ month
Stock New construction Vacancy A & AB
0
5
10
15
20
25
30
35
2004 2005 2006 2007 2008 2009 2010 2011f
Class AB Rent Class A Rent
US$/m2/month
Caracas
Mexico City
PeakingMarket
FallingMarket
Bottoming Market
RisingMarket San Juan,
Santo DomingoSão Paulo
Monterrey, San Jose, Panama City, Buenos Aires
Rio de Janeiro
Lima, Bogotá
Santiago
Key Business Activities
Office Market Statistics
Bogota Map
Latin America Office Clock
Major Business Sectors: Industrial (Coal Mining), Services, Agriculture (flowers, coffee)
Major Real Estate Developments:
Connecta, Tierra Firme, Ciudad Empresarial Salitre
Q4 2010 2011(f)
Trend (next 12 months)
Class A Rent (US$/m²/mo) 29-34 30-35
Class AB Rent (US$/m²/mo) 25-30 24-29
Total Occ. Costs Class A (US$/m²/mo) 32-39 33-40
Total Occ. Costs Class AB (US$/m²/mo) 28-35 27-34
Service Charges (US$/m²/mo) 3-5 3-5
Stock (000 m²) 1,482 1,580
Vacancy (‘000 m²) 126 126
Vacancy Rate (%) 8.5% 8%
Future Supply 2011(f)
(‘000 m²) 100
Sources: JLL, Data as of Jan 2011
HISTORICAL RENTAL RATE Class A & AB Buildings
HISTORICAL STOCK, NEW CONSTRUCTION & VACANCY Class A and AB Buildings
Pulse • Q4
Typical Leasing Practices
Standard Unit of Measurements
Unit of Measurements Square Meters
Rental Payments
Rents Quoted in COP /m² /month
Typical Lease Term 3-5 years Frequency of Rent Payable in Advance
Monthly
Rent Deposit (expressed as x months rent)
Case-by-case, insurance policy covering the contract is typical
Security of Tenure Only for the duration of the tenancy, no guarantee beyond the original lease term
Statutory Right to Renew No (unless an option to renew is agreed at the outset and specified in the lease)
Basis of Rent Increases or Rent Review
Case-by-case basis, CPI + 2 (Typically indexed as a percentage of local CPI, but this can vary)
Frequency of Rent Increases or Rent Review
Yearly
Incentives Rent Free Period (months) Case-by-case basis, 1-3 months The rent free period is not standardized in the local market, however typically occurs. The length of this period is negotiated between the parties and is also a factor of how much (if any) tenant improvement allowance is provided.
Taxation (Lease Contracts)
Stamp Duty Called the Impuesto de timbre. Currently 1/1000th of the total contract value. Will diminish to 0% by 2010
Building Insurance Landlord
Local Property Taxes Landlord, annually
VAT / GST Payable on Rent & Service Charge (Payable by Tenant)
10%
Easy of Doing Business (Ranked out of 32 Countries) *1=Easiest/32=Hardest Easy of Doing Business 3 Starting a Business 14 Dealing with Construction Permits 9 Registering Property 6 Getting Credit 10 Protecting Investors 1 Paying Taxes 19 Trading Across Borders 17 Enforcing Contracts 25 Closing a Business 5
Disposal of Leases
Sub-Letting & Assignment Normally Yes (subject to landlord approval)
Early Termination Unless otherwise stipulated in the rental contract, tenant is responsible for paying the entirety of the contractual obligation
Tenant's Building Reinstatement Responsibilities at Lease End
Original Condition, allowing for normal wear and tear
Lease Transaction Fees
Agency Fee Calculation 2 month’s rent Agency Fee (payable by Landlord/tenant)
Landlord/Tenant
Legal Fee (payable by Landlord/tenant)
Each part responsible for its legal costs
Service Charges, Operating Costs, Repairs and Insurance Service Charges/Managements fees
Additionally to the rental charge and payable monthly in advance
Utilities (Sometimes separately metered, sometimes paid as a percentage of occupation)
Electricity, telephone, AC, etc. paid by tenant according to consumption
Car Parking 1 space per 50m²
Internal (Tenant Space) Tenant Common Areas (reception, lifts, stairs, etc.)
Landlord (Charged back via service charge)
External / Structural Landlord
Building Insurance Landlord
Purchasing Property
Land Title Mainly Freehold
Foreign Ownership No Restrictions Strata Title (Partial ownership of the building)
Strata title ownership is quite common
Security Deposit Case-by-case basis
Agency Fees 2-month rent usually paid by seller
Legal Fees The seller or arranged on case-by-case basis
Stamp Duty Called the Impuesto de Timbre. Currently 1/1000 of the total contract value. Will diminish to 0% by 2010. Paid by Seller.
Other Transaction Costs 1% transfer tax paid by Seller. Notary Fee of 2.7% split between parties
Pulse • Q4
COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. Unauthorized reproduction prohibited. This publication is based on material that we believe to be reliable. While every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors
Glossary of Terms Contacts
Latin Business Index 2009
The Latin Business Index released by the Latin Business Chronicle measures the macro economy, globalization and competitiveness, technology levels, and the corporate and political environments of 19 Latin American countries. It is published annually and utilizes data from the World Bank, Transparency International, the United Nations and the Heritage Foundation.
Class A Rent Range
Represents the top range of open market rent that could be expected for a top quality office unit in a preferred location, as of the survey date (normally at the end of each quarter period). The rent quoted normally reflects prime units of over 200 m² of rentable floor space, which excludes rents that represent a premium paid for a small quantity of space. The Class A Rent Range reflects an occupational lease that is standard for the local market. It is a face rent that does not reflect the financial impact of tenant incentives and excludes service charges and local taxes. It excludes any unrepresentative deals.
Class AB Rent Range
Represents the range of open market rent that could be expected for a medium-to-high quality office unit in a good location as of the survey date (normally at the end of each quarter period). The rent quoted normally reflects prime units of over 200 m² of rentable floor space, which excludes rents that represent a premium paid for a small quantity of space. The Class AB Rent Range reflects an occupational lease that is standard for the local market. It is a face rent that does not reflect the financial impact of tenant incentives and excludes service charges and local taxes. It excludes any unrepresentative deals.
Vacancy Rate
The Vacancy rate represents an approximate amount of immediately vacant office floor space in all completed buildings within a market as of the survey date (normally at the end of each quarter period), expressed as a percentage of the total stock.
Stock The Stock is an approximate number of total quality spaces in a given market suitable for large multi-national tenants. Depending on the market, its specific characteristics and dynamics, properties of differing quality may or may not be included in the Stock.
For further information on any prospective client requirements, please contact Elias Lindenberg. For further information on research, please contact Manuel Gomez.
Latin America Contacts
Argentina
Rodrigo Millan +54 11 4893 2600
Brazil
Monica Lee +55 11 3043 6900 [email protected]
Chile Marcelo Carrere +56 2 3740070
[email protected] Colombia
Jean Baptiste Wettling
+57 1 475 8657
Mexico
Hector Klerian +52 55 5202 7190
Northern Cone
Zach Cheney +54 11 4893 2600 [email protected]
Corporate Solutions
Elias Lindenberg +56 2 374 0070 [email protected]
Regional Research
Manuel Gomez +54 11 4893 2600 [email protected]
Northern Cone: Colombia, Costa Rica, Dominican Republic, Panama, Puerto Rico, Venezuela, Central America and the Caribbean. Southern Cone: Argentina, Chile and Peru.