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The executive described the current condition of the Chilean office market, induced by a slowdown in the economy that has increased vacancy levels, thus activating a high dynamism in the supply side.
Santiago, September 30th, 2015 - JLL, a reference in the Real Estate Market, gave an interview to PULSO, a prestigious local business and finance newspaper through their country manager, Marcelo Carrere.
In the interview, Carrere revealed the keys to understand current market dynamics, which are characterized by an increase in vacancy levels. According to his perspective, this scenario calls for greater creativity and flexibility from the supply, in order to give more dynamism to the market.
The following are the main topics covered in the interview:
Pulse: In your opinion, what is the current situation of Santiago´s office market?
JLL, a company accustomed to provide services to national companies and global corporations, analyzes the corporate-standard market, comprised of Class A and Class AB office buildings. In this context, we consider that the market is in a healthy condition, as it is in a necessary adaptation phase. Santiago is a relatively young market –15 or 18 years old – and was accustomed to a very particular dynamism, with vacancy rates under 2%. This implied an imbalance in the market, as when vacancy levels are below 3%, any available property has a high price, regardless of its category or location. What is the current scenario? With the recent construction boom in the office segment, vacancy rates and prices started to settle. Presently, vacancy has positioned in ranges that we consider healthy, i.e., between 7% and 11%. But when observing specific sectors such as “Sanhattan” or El Bosque – El Golf, vacancy is near zero.
P: There are consolidated neighborhoods like Sanhattan or Nueva Las Condes, with few new developments or land availability, how would be the analysis of these areas? Where could opportunities be identified?
The consolidation of a market is not aligned with the lack of land availability. It refers to when a market has a defined character. If we look at El Golf sector we can appreciate a full corporate market area with a very specific focus on international funds and large corporations. Nueva Las Condes is now a market with the same character. There are new areas that are beginning to be developed such as the Apoquindo Ave. axis from Vespucio Ave. towards the east, which is connecting two important office areas - Nueva Las Condes and El Golf – .Vitacura, on the other hand, has focused on medium-sized companies, with boutique offices and lower density.
P: Generally speaking, how many square meters will enter by year-end and how do you see the absorption of these?
The absorption rhythm has decelerated, but that’s something completely natural. We’re expecting about 250,000 square meters to be delivered this year. This figure is going to decrease; next year 180,000 sq. m. approximately are projected for delivery and in 2017 there is an estimation of 100,000 square meters of new offices to be delivered. Even though demand could be higher or lower, it would be constant, therefore vacancy is expected to adjust again.
P: Are rent free periods or financing of fit out works more frequent now in the market?
Indeed, as more supply is available, it is necessary to be more creative and flexible to capture demand. In this sense, every owner has begun to offer more sophisticated solutions, such as rent-free periods, flexibility in rent payment, financing of fit-out works, among others.
P: Is this the case for Costanera Center Tower 2, where you are in charge of the commercial phase?
"Rent-free periods are actually being provided and there is the possibility of financing the offices’ fit out works.
Read the full interview:
JLL is a financial and professional services firm that specializes in commercial real estate services and investment management. We’re in business to create and deliver real value through commercial real estate for clients, shareholders and our own people. In a complex world that is constantly changing, JLL is committed to helping you understand and navigate the intricacies of commercial real estate—whether you’re an investor or occupier of space. Our 58,000 people across 230 corporate offices worldwide serve the local, regional and global real estate needs of corporates and investors in more than 80 countries. They deliver integrated commercial real estate services built on insight and foresight, sound market research and relevant knowledge. http://www.jll.com/
Jorge Araos Mujica
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