Office Market Overview

Transcription

1 Office Market Overview Latin America Mid-year 2016 Several countries are hit by falling commodity prices, struggling export demand, and tightening US monetary policy. Office markets across the region are experiencing high vacancy and stagnant rents. Over 2,500,000 m 2 of new production in Over 1,500,000 m 2 of net absorption in Vacancy rises 1.3% region-wide Y-o-Y. Over 5,200,000 m 2 of new production over the next two years will keep pushing vacancy up and rents down. Buenos Aires, Argentina: The election of a center-right president could mark a turning point for the Argentinian economy.

2 JLL Latin America Office Market Overview Mid year Introduction: Location Map and Market Clock Monterrey Guadalajara Mexico City Guatemala City San José Medellín Cali Guayaquil Panama City Quito Bogotá San Juan Barranquilla Caracas Mexico City Caracas Lima Monterrey, Medellin Guadalajara Peaking market Rising market Falling market Bottoming market Bogotá San José Lima, Santiago Panama City Santiago Buenos Aires São Paulo Montevideo Rio de Janeiro Colombia Caribbean, Montevideo Guatemala City, Rio de Janeiro San Juan, São Paulo Buenos Aires Guayaquil, Quito, Cali

3 JLL Latin America Office Market Overview Mid year Executive Summary: Population by Country and Major Markets, 2015 Montevideo Uruguay Panama City Panama San Juan Puerto Rico San José Costa Rica Guatemala City Guatemala Guayaquil Quito Ecuador Santiago Chile Caracas Venezuela Lima Peru Buenos Aires Argentina Barranquilla Cali Medellin Bogota Colombia Guadalajara Monterrey Mexico City Mexico Rio de Janeiro São Paulo Brazil Major Market Population (millions) Country Population (millions) Source: Oxford Economics (2015) Several Latin American countries have one large city that accounts for a significant share of the national population. 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 the most widely distributed populations. Each contains several cities with over one million inhabitants.

4 Brazil Sao Paulo Rio de Janeiro Mexico Mexico City Monterrey Guadalajara Argentina Buenos Aires Colombia Bogota Medellin Cali Barranquilla Chile Santiago Peru Lima Venezuela Caracas Puerto Rico San Juan Ecuador Quito Guayaquil Uruguay Montevideo Guatemala Guatemala City Costa Rica San Jose Panama Panama City Country GDP (Millions of USD PPP) Country GDP Per Capita (USD PPP) JLL Latin America Office Market Overview Mid year Executive Summary: GDP by Country and Major Markets (USD PPP) $ $ Country GDP (Billions of USD PPP) Major Market GDP (USD PPP) Country GDP Per Capita (USD PPP) $ $ $ $ $ $ $ $ $ $5.000 $0 $0 Source: United Nations (2014) Brazil and Mexico by far have the largest economies in Latin America. However the countries with the highest GDP per capita are Puerto Rico, Uruguay, Chile, and Argentina (although Puerto Rico is in the midst of a decade-long recession). Currency devaluations across Latin America over the past year have shrunk the value of several economies in terms of USD, most notably Colombia, Chile, Peru, Venezuela, Argentina, and Brazil. In 2015 several Latin American countries saw stagnant growth and a few Brazil, Puerto Rico, and Venezuela saw their economies contract.

5 JLL Latin America Office Market Overview Mid year Executive Summary: Total Stock (m²), EY 2015 Mexico City São Paulo Santiago Bogotá Rio de Janeiro Lima Quito Buenos Aires Panama City Caracas Monterrey San José San Juan Medellín Guayaquil Guatemala City Montevideo Cali Col. Caribbean Guadalajara Rentable Area (m2) Source: JLL Research (2016) The largest office markets in Latin America remain Mexico City, São Paulo, and Santiago. This is consistent with their reputations as 3 of the primary business hubs in the region. JLL has expanded coverage in Guatemala City in 2015, bringing the total number of markets covered in this report to 20. Adjustments have been made to market data from Quito and Guayaquil compared to past reports due to a change in sample size. JLL tracks a sample of approximately 30 million m 2 of office area in Latin America. Over half of this is contained in the 4 largest markets: Mexico City, São Paulo, Santiago, and Bogotá.

6 JLL Latin America Office Market Overview Mid year Executive Summary: s, EY 2015 Panama City Col. Caribbean Rio de Janeiro São Paulo San Juan Monterrey San José Lima Mexico City Bogotá Santiago Guadalajara Cali Medellín Buenos Aires Guayaquil Guatemala City Montevideo Caracas Quito Market equilibrium vacancy rate: 8-12% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Source: JLL Research (2016) Panama City demonstrates by far the highest vacancy rate in Latin America, and one of the highest in the world. It is characterized by a high proportion of hedge real estate investments made with capital originating in other countries. 8 cities are above the equilibrium vacancy range of 8-12%, which means they are oversupplied and tenant-favorable at the moment. 6 cities have a vacancy rate that is below the market equilibrium range. These include Buenos Aires, Caracas, and Quito, which have seen limited new supply because of market uncertainty. Montevideo, Guayaquil, and Guatemala City have low vacancy rates because they are small markets and most developers are reluctant to introduce new product since demand is so low.

7 JLL Latin America Office Market Overview Mid year Executive Summary: Change in Vacancy (m 2 ), Y-o-Y -2,4% -1,6% Montevideo Monterrey -1,2% Cali -0,5% Guatemala City -0,5% Caracas Quito Santiago 0,2% 0,2% Buenos Aires São Paulo Mexico City 0,3% 0,8% 1,0% San José 1,1% Guayaquil San Juan 1,4% 1,5% Guadalajara 2,8% Medellin Panama City Rio de Janeiro Bogotá Lima Colombia Caribbean 4,0% 4,3% 4,6% 5,3% 10,0% 19,2% -5% 0% 5% 10% 15% 20% 25% Y-o-Y Change in Source: JLL Research (2016) The Colombia Caribbean (mainly Barranquilla) has seen the highest Y-o-Y rise in vacancy, as it went from 8% to 27% in one year. Only five cities Montevideo, Monterrey, Cali, Guatemala City, and Caracas - have seen a net drop in vacancy over the past year, and it has been a small change. Vacancy has risen in ever other city, given that many are in the middle of a building boom that is leaving considerable excess space available. Santiago, Lima, and Bogotá, three major markets that have been landlord-favorable for the past decade, are now moving towards a more tenant-favorable dynamic.

8 JLL Latin America Office Market Overview Mid year Executive Summary: Production (m 2 ), Y-o-Y Mexico City São Paulo Lima Bogotá Panama City Santiago Rio de Janeiro San José Quito Medellín Monterrey Col. Caribbean Buenos Aires Guayaquil Montevideo Guatemala City Caracas Cali Guadalajara San Juan Rentable Area (m2) Source: JLL Research (2016) Mexico City led the region in office production this year with 675,000 m 2 of new deliveries in Production outpaced net absorption in all LatAm markets in 2015 with the exception of 6: Cali, Quito, Guayaquil, Monterrey, Guadalajara, and Montevideo. A handful of markets Mexico City, Lima, and Colombia Caribbean - saw record office production in 2015.

9 JLL Latin America Office Market Overview Mid year Executive Summary: Net Absorption (m 2 ), Y-o-Y Mexico City São Paulo Santiago Lima Bogotá Quito Panama City Monterrey San José Guayaquil Medellín Buenos Aires Caracas Rio de Janeiro Guatemala City Guadalajara Cali Col. Caribbean Montevideo San Juan Rentable Area (m2) Source: JLL Research (2016) With 470,000 m 2 of net absorption, Mexico City was responsible for nearly 1/3 of the net office absorption in Latin America for of the 10 most active markets in terms of demand belong to the Pacific Alliance, a reflection of the relatively optimistic outlook in these countries. San Juan saw negative net demand for the 4 th straight year. No other city had negative absorption in Santiago, Bogotá, and Lima had strong years for demand despite adverse conditions facing their exporting industries.

10 JLL Latin America Office Market Overview Mid year Executive Summary: Production Pipeline ( ) vs. Current Stock (m 2 ) Mexico City 18% São Paulo 14% Bogotá 28% Lima 33% Monterrey 21% Guadalajara 130% Rio de Janeiro 15% Santiago 8% Quito 20% Panama City 16% Buenos Aires San José Caracas Medellín Col. Caribbean Guayaquil Guatemala City Cali San Juan Montevideo 48% 12% 0% 23% 12% 9% 0% 14% 16% 13% *Data label shows percentage growth in stock, Q Q Current Stock Production, Rentable Area (m2) Source: JLL Research (2016) Mexico City has over 1,000,000 m 2 of new production in the pipeline through the end of 2017, representing a growth of 18% over existing stock. The markets that will grow the most over the next two years in proportion to their current size are Guadalajara - which will more than double in the next 2 years as well as Lima, Bogotá, Medellin, and the Colombia Caribbean. Low demand continues to impede any new supply in Montevideo and San Juan.

11 JLL Latin America Office Market Overview Mid year Executive Summary: Average Asking Rents, EY 2015 Caracas Montevideo Rio de Janeiro Buenos Aires Mexico City São Paulo Lima Guadalajara Bogotá Santiago Panama City Quito Monterrey San José San Juan Col. Caribbean Guayaquil Medellín Cali Guatemala City *All rents are at the December 2015 exchange rate. Average Rent Class A Average Rent Class AB $- $5 $10 $15 $20 $25 $30 $35 $40 $45 Average Rent (USD/m2/month) Source: JLL Research (2016) Caracas rents are comparable to other markets when considered at the parallel exchange rate (~1,000 VEF/USD). However, multinational companies who cannot resort to this method must use the official rate (6.3 VEF/USD) which is wildly overvalued and pushes rents up into the $800 - $2,000/m 2 /month range. The lowest rents in Latin America by far are in Guatemala City, where Class A offices are leasing at between USD $10-11/m 2 /month. Despite the devaluation of the Brazilian Real and falling demand, rents remain high in Rio de Janeiro due to geographical restrictions that limit new development.

12 JLL Latin America Office Market Overview Mid year Executive Summary: Change in Average Rents, Y-o-Y *All rents are at the December 2015 exchange rate. Percent Change: Class A Avg. Rent Percent Change: Class AB Avg. Rent Panama City Caracas Guatemala City Mexico City San José Buenos Aires Cali Guadalajara Monterrey San Juan Guayaquil Montevideo Lima Medellín Quito Santiago Col. Caribbean Bogotá São Paulo Rio de Janeiro -50% -40% -30% -20% -10% 0% 10% 20% Change in Average Rents, Y-o-Y Source: JLL Research (2016) Rents have fallen nearly across the board in Latin America, in line with rising production and stagnant demand. This has been intensified by exchange rate devaluations, which have affected some countries more than others. Brazil has seen the sharpest fall, with Class A rents in São Paulo and Rio falling around 40% since last year. In Mexico, Monterrey and Guadalajara have seen a decline in rents owing to exchange rate volatility, however rents in the capital city have remained stable. Rents fell sharply in Colombia. In Bogotá oversupply has pushed rents down in local currency while the devaluation of the COP has pushed rents down in dollars in all 4 Colombian markets.

13 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Executive Summary: Production and Absorption of Major Markets, Mexico City Sao Paulo Rio de Janeiro Santigo Bogota Lima Panama City Buenos Aires Source: JLL Research (2016) The US recession of 2008 triggered a building boom in Latin America s major cities. Damaged consumer confidence and low interest rates led many investors to pursue high returns in emerging markets, resulting in a sharp increase in new supply of office buildings. This boom intensified from However investors and developers are becoming more reluctant to start new projects as falling rents and high vacancy are driving yields down. Consequently, cities like Bogotá, Santiago, São Paulo, Mexico City, Lima, and Panama City will begin to see production fall after the next two years as the markets adjust to oversupply.

14 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Executive Summary: Regional Production and Absorption, Production Net Absorption 20% 18% 16% % 12% % 8% % % 2% % Source: JLL Research (2016) In the aggregate, 2015 saw the delivery of 2,550,000 m 2 of new supply and a net absorption of 1,550,000 m 2. Production is outpacing demand nearly across the board. Demand was surprisingly strong in places like Lima, Bogotá, Santiago, and Brazil where markets have been battered by falling commodity prices. Falling commodity prices have been counterbalanced by rents that have fallen in dollar terms, motivating many companies to upgrade or consolidate. This explains much of the significant increase in demand over Vacancy region-wide is at 15%, up from 13.8% a year ago.

15 JLL Latin America Office Market Overview Mid year Market Snapshots Buenos Aires, Argentina 15 São Paulo, Brazil 16 Rio de Janeiro, Brazil 17 Santiago, Chile 18 Bogotá, Colombia 19 Medellín, Colombia 20 Cali, Colombia 21 Barranquilla, Colombia 22 San José, Costa Rica 23 Quito, Ecuador 24 Guayaquil, Ecuador 25 Guatemala City, Guatemala 26 Mexico City, Mexico 27 Monterrey, Mexico 28 Guadalajara, Mexico 29 Panama City, Panama 30 Lima, Peru 31 San Juan Puerto Rico 32 Montevideo, Uruguay 33 Caracas, Venezuela 34 Comparison of market leasing practices 35 Contacts 36

16 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Argentina Buenos Aires The election of Mauricio Macri in 2015 signifies a potential change of course for the Argentinian economy. Meanwhile the opposition is growing increasingly fragmented with several congressmen leaving the opposition block. This should make Macri s proposed reforms easier to pass. The Macri government has discontinued expensive energy subsidies and is expected to proposed other spending cuts to put the country on a more fiscally sustainable path. He is also beginning an overhaul of the INDEC, the government statistical bureau, to restore transparency and integrity in key indicators. A USD $16.5 billion bond issue was emitted in April to settle the government s holdout with international creditors. This has paved the way for Argentina to return to international debt markets, and issuances are likely to increase in the second half of The Argentinian peso has been one of the few currencies worldwide to hold its ground over the past year against the dollar. However it could begin to slip by the end of the year as the Central Bank gradually allows monetary policy to loosen. Total stock (m²) 1,307,000 Overall vacancy rate 7.2% Production (m²) 32,000 Net absorption 2015 (m²) 26,000 Expected production 2016 (m²) 100,000 Expected net absorption 2016 (m²) 50,000 Class A rental range (USD/m²/mo.) $27 30 Class AB/B+ rental range (USD/m²/mo.) $18 25 Average purchase price range (USD/m²) $3,300 4,400 Historic production, absorption, and vacancy In an election year characterized by uncertainty and risk aversion, the market was relatively quiet with only 25,000 m 2 of net absorption. The majority of this 18,000 m 2 was concentrated in the AB segment. Capital market transactions have been more prevalent than leases, as companies look to hedge currency risks by purchasing assets. Vacancy seems to have stabilized in the 6-7% range. Rents fell by -1.2% Y-o-Y on average Production Absorption Vacancy Forecast 30% 25% 20% 15% 10% 5% 0% Over 100,000 m 2 are scheduled for completion in 2016, a sharp increase over the past few years that should raise vacancy.

17 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Brazil São Paulo Brazil is currently experiencing one of the worst recessions in its history, with the economy likely to contract by at least 4% in Inflation has moderated somewhat this year, though at around 9% Y-o-Y in May, it is still well above the Central Bank s target rate. Interest rate cuts this year are unlikely. Amidst economic mismanagement and a ballooning corruption scandal at Petrobras, the state-run oil company, the Brazilian Congress and Senate have voted to impeach Dilma Rousseff. Yet her Workers Party has fought back, accusing the opposition of a coup and pointing to the fact that many politicians leading the impeachment proceedings are themselves under investigation for involvement in the Petrobras affair. Vice President Michel Temer has taken over the government in the interim. Yet with growing resentment between his PMDB and Rousseff s Workers Party, any reforms will be difficult to pass. Total stock (m²) 4,493,000 Overall vacancy rate 23,6% Production (m²) 412,000 Net absorption 2015 (m²) 206,000 Expected production 2016 (m²) 370,000 Expected net absorption 2016 (m²) 200,000 Class A rental range (USD/m²/mo.) $11-48 Class AB/B+ rental range (USD/m²/mo.) $10-44 Average purchase price range (USD/m²) $1,300 5,900 Vacancy in São Paulo reached 23.6% in 2015 and is expected to rise to 25% in 2016, a historic mark for the metropolis. The submarkets that are driving the increase in vacancy are Alphaville, Barra Funda, Bernini, Marignal, and Vila Olimpia. Net office absorption surpassed 200,000 m 2 for the second straight year as tenants are taking advantage of favorable market conditions to expand and/or consolidate their operations. Historic levels of production continue to put strong downward pressure on rents. Class A rents are down 5.5% from 2014 and 9.4% from With another 800,000 m 2 in the pipeline from , the current trends of high vacancy and falling rents will persist. However new production is expected to slow down as the market returns toward equilibrium. Historic production, absorption, and vacancy Production Absorption Vacancy Forecast 40% 35% 30% 25% 20% 15% 10% 5% 0%

18 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Brazil Rio de Janeiro Brazil is currently experiencing one of the worst recessions in its history, with the economy likely to contract by at least 4% in Inflation has moderated somewhat this year, though at around 9% Y-o-Y in May, it is still well above the Central Bank s target rate. Interest rate cuts this year are unlikely. Amidst economic mismanagement and a ballooning corruption scandal at Petrobras, the state-run oil company, the Brazilian Congress and Senate have voted to impeach Dilma Rousseff. Yet her Workers Party has fought back, accusing the opposition of a coup and pointing to the fact that many politicians leading the impeachment proceedings are themselves under investigation for involvement in the Petrobras affair. Vice President Michel Temer has taken over the government in the interim. Yet with growing resentment between his PMDB and Rousseff s Workers Party, any reforms will be difficult to pass. Total stock (m²) 1,950,000 Overall vacancy rate 24,3% Production (m²) 142,000 Net absorption 2015 (m²) 16,000 Expected production 2016 (m²) 186,000 Expected net absorption 2016 (m²) 100,000 Class A rental range (USD/m²/mo.) $18-55 Class AB/B+ rental range (USD/m²/mo.) $18-72 Average purchase price range (USD/m²) $2,200 8,900 Overall vacancy in Rio de Janeiro is approaching record levels at 24.2%. This is driven by low occupancy in submarkets such as Barra de Tijuca, Centro, Orla, and Porto Maravilha. Net absorption in Rio was very low for the second straight year, as several companies are downsizing and returning space. This trend was particularly present in the Orla submarket. Historic production, absorption, and vacancy Production Absorption Vacancy Forecast 40% 35% 30% 25% Rents decreased by 12% on average Y-o-Y. Rents fell hardest in the Zona Sul, Orla, and Porto Maravilha submarkets should see a continuation of falling rents and rising vacancy, however absorption should recover due to favorable conditions for tenants % 15% 10% 5% 0% Rio is preparing to host the 2016 Summer Olympics. This should provide a huge jolt to the local economy and has already spurred significant investment in infrastructure, tourism, and security.

19 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Chile - Santiago Strong consumer spending, a growing services sector, and a recovering industrial sector have support the Chilean economy through Mining has also recovered, as the deceleration of the Chinese economy has not been as painful as was anticipated. The Chilean Peso continues to slide against the US Dollar. This has generated mild inflation and will raise government debt, yet the economy should be buffered by the reserves accumulated in the Stabilization Fund as well as a robust financial system. The Chilean congress is about to ratify the Trans-Pacific Partnership, which would reduce barriers to trade in goods and services and should boost trade with countries such as the US. Demand was strong in 2015 despite the ripple effects in the extractives sector. Vacancy is just shy of 10%, its highest mark in over a decade. With another 170,000 m 2 in the pipeline for 2016, vacancy is expected to reach 11% within another year. Considering the headwinds facing the Chilean economy and the oversupply currently seen in the market, it is likely that office production beyond 2015 will fall. Production in 2017 and 2018 is not expected to exceed 100,000 m 2. High vacancy is giving tenants more leverage and has pushed rents down by 10% since As the Chilean Peso weakens against the dollar, rents will look more attractive for multinational tenants who do their accounting in USD. The Santiago office market has grown steadily to the northeast over the past decade and today is mostly contained in the Las Condes submarket. This trend could continue over the next few years as neighborhoods like Los Dominicos, Estoril, and La Dehesa are becoming increasingly consolidated. Total stock (m²) 3,115,000 Overall vacancy rate 9.9% Production (m²) 177,000 Net absorption 2015 (m²) 162,000 Expected production 2016 (m²) 170,000 Expected net absorption 2016 (m²) 140,000 Class A rental range (USD/m²/mo.) $19 24 Class AB/B+ rental range (USD/m²/mo.) $16-20 Average purchase price range (USD/m²) $3,300 4,400 Historic production, absorption, and vacancy Production Absorption Vacancy Forecast 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

20 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Colombia - Bogotá The combined effect of falling exports and US monetary policy tightening has reduced appetite for investments. This has put significant pressure on the current account balance, causing the peso to lose nearly half its value since 2014 and raising the cost of imported products. Falling oil revenues have exposed fiscal and current account deficits that the government is increasingly facing pressure to fill. A tax reform is expected for later this year that should help address these issues. The recent El Niño weather phenomenon has left most of Colombia in a severe draught, straining agricultural production and hydroelectric power generation, and causing a sharp increase in food and energy prices. Inflation ended the year at nearly 7%, its highest rate in years. An agreement has been reached in principle between the government and the FARC to end a 60-year civil war in It is expected to be signed by the end of the year. Total stock (m²) 2,054,000 Overall vacancy rate 11.4% Production (m²) 247,000 Net absorption 2015 (m²) 122,000 Expected production 2016 (m²) 331,000 Expected net absorption 2016 (m²) 137,000 Class A rental range (USD/m²/mo.) $20-25 Class AB/B+ rental range (USD/m²/mo.) $15-22 Average purchase price range (USD/m²) $2,000 3,300 *Exchange rate fluctuations have made prices fall considerably in USD. For this report JLL uses an exchange rate of 3,000 COP/USD. Rents are stated in COP locally. The Bogotá market saw its second highest year for new supply in 2015 with 247,000 m 2 of new completions. The boom will continue at least through 2018, however forecasts indicate that production will fall back to normal levels beyond that. Rents have begun to fall in local currency due to oversupply. However when stated in USD, rents have plummeted by 50%. Class A buildings that were leasing at USD $35-40/m 2 /month a year ago are now between $20-25/m 2 /month. Demand was strong in 2015, driven by public sector flight to quality and new entries in the private sector. Many companies are taking advantage of the cheap rents in USD. These factors have resulted in strong net absorption of 122,000 m Historic production, absorption, and vacancy Production (m2) Net Absorption (m2) Vacancy (%) Forecast 30% 25% 20% 15% 10% 5% 0%

21 Average Rents (COP) Average Rents (USD) JLL Latin America Office Market Overview Mid year Colombia - Medellin The combined effect of falling exports and US monetary policy tightening has reduced appetite for investments. This has put significant pressure on the current account balance, causing the peso to lose nearly half its value since 2014 and raising the cost of imported products. Falling oil revenues have exposed fiscal and current account deficits that the government is increasingly facing pressure to fill. A tax reform is expected for later this year that should help address these issues. The recent El Niño weather phenomenon has left most of Colombia in a severe draught, straining agricultural production and hydroelectric power generation, and causing a sharp increase in food and energy prices. Inflation ended the year at nearly 7%, its highest rate in years. An agreement has been reached in principle between the government and the FARC to end a 60-year civil war in It is expected to be signed by the end of the year. Total stock (m²) 626,000 Overall vacancy rate 7.9% Production (m²) 56,000 Net absorption 2015 (m²) 29,000 Expected production 2016 (m²) 98,000 Expected net absorption 2016 (m²) 47,000 Class A rental range (USD/m²/mo.) $14 20 Class AB/B+ rental range (USD/m²/mo.) $9-15 Average purchase price range (USD/m²) $1,400 2,500 *Exchange rate fluctuations have made prices fall considerably in USD. For this report JLL uses an exchange rate of 3,000 COP/USD. Rents are stated in COP locally. Change in Rents, COP vs. USD The Medellin city government is ambitiously pushing several initiatives to enhance the city s competitiveness. These include new zoning plans to incentivize mixed use vertical development as well as infrastructure investments like Parques del Rio, a light rail and bus rapid transit system, and a proposed tunnel road to the airport. New supply is growing strongly will be a record year for office production with 98,000 m 2 to be delivered. $ $ $ $ $ Class A - COP Class AB - COP Class A - USD Class AB - USD $35 $30 $25 $20 $15 Vacancy rose from 3.9% in 2014 to 7.9% in 2015, mainly due to the completion of One Plaza and Milla de Oro, two Class A+ buildings that added over 40,000 m 2 to the market. Still, vacancy in Medellin remains among the lowest in the region. $ $10

22 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Colombia - Cali The combined effect of falling exports and US monetary policy tightening has reduced appetite for investments. This has put significant pressure on the current account balance, causing the peso to lose nearly half its value since 2014 and raising the cost of imported products. Falling oil revenues have exposed fiscal and current account deficits that the government is increasingly facing pressure to fill. A tax reform is expected for later this year that should help address these issues. The recent El Niño weather phenomenon has left most of Colombia in a severe draught, straining agricultural production and hydroelectric power generation, and causing a sharp increase in food and energy prices. Inflation ended the year at nearly 7%, its highest rate in years. An agreement has been reached in principle between the government and the FARC to end a 60-year civil war in It is expected to be signed by the end of the year. Total stock (m²) 210,000 Overall vacancy rate 8.3% Production (m²) 3,800 Net absorption 2015 (m²) 7,500 Expected production 2016 (m²) 16,000 Expected net absorption 2016 (m²) 12,000 Class A rental range (USD/m²/mo.) $15 20 Class AB/B+ rental range (USD/m²/mo.) $8 15 Average purchase price range (USD/m²) $1,400 2,300 *Exchange rate fluctuations have made prices fall considerably in USD. For this report JLL uses an exchange rate of 3,000 COP/USD. Rents are stated in COP locally. Ownership Structure by Submarket Cali has great potential for growth owing to its educated populace, large medical cluster, and access to the Pacific Ocean. However 2015 was a slow year for the economy as trade with Pacific partners mainly with China took a large hit. The Cali market is oriented toward the extremes, with the vast majority of companies operating in very small spaces and a small number of companies who have headquarters in the Valle de Cauca owning or leasing an entire building was a quiet year for the market with very limited production and limited net absorption. The next 12 months will be very telling for the Cali market as the delivery of 3 Class A buildings will gauge the level of demand Single User Simplified Strata Title Vacancy Centro Versalles Ciudad Jardin Other 30% 25% 20% 15% 10% 5% 0%

23 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Colombia - Barranquilla (and Caribbean) The combined effect of falling exports and US monetary policy tightening has reduced appetite for investments. This has put significant pressure on the current account balance, causing the peso to lose nearly half its value since 2014 and raising the cost of imported products. Falling oil revenues have exposed fiscal and current account deficits that the government is increasingly facing pressure to fill. A tax reform is expected for later this year that should help address these issues. The recent El Niño weather phenomenon has left most of Colombia in a severe draught, straining agricultural production and hydroelectric power generation, and causing a sharp increase in food and energy prices. Inflation ended the year at nearly 7%, its highest rate in years. An agreement has been reached in principle between the government and the FARC to end a 60-year civil war in It is expected to be signed by the end of the year. Total stock (m²) 175,000 Overall vacancy rate 26.75% Production (m²) 44,000 Net absorption 2015 (m²) 9,000 Expected production 2016 (m²) 45,000 Expected net absorption 2016 (m²) 21,000 Class A rental range (USD/m²/mo.) $14 21 Class AB/B+ rental range (USD/m²/mo.) $8 15 Average purchase price range (USD/m²) $1,600 2,000 *Exchange rate fluctuations have made prices fall considerably in USD. For this report JLL uses an exchange rate of 3,000 COP/USD. Rents are stated in COP locally. Stock and Vacancy by Submarket Colombia s economic emergence has had a transformative economic multiplier effect on the Caribbean region anchored by the port cities of Cartagena, Barranquilla, and Santa Marta. This is reflected in a swell of interest in real estate that has over 100,000 m 2 of Class A office space under construction Production (m2) Absorption (m2) Forecast 40% 35% 30% 25% Thus far demand has been disappointing in this nascent market. In ,000 m 2 of new supply was completed but demand was short of 10,000 m 2. As a result the vacancy rate has shot up from 7.6% a year ago to 26.75% today. With another 100,000 m 2 to be completed by 2018, JLL forecasts that vacancy in the Caribbean region could reach 35% by % 15% 10% 5% 0%

24 USD/m2/month JLL Latin America Office Market Overview Mid year Costa Rica San José The Costa Rican economy has accelerated in This has been driven by expansionary monetary policy, continued US economic growth which has boosted exports, increased foreign investment in the service sector, and infrastructure spending specifically the Limon port terminal, several highway projects, and an electric train for San José. Inflation, at 1%, was under the Central Bank s target range. The policy interest rate has been cut from 5.25% a year ago to 2.25% to generate spending and put upward pressure on inflation. President Luis Guillermo Solis is pushing a tax reform intended to ease the nation s fiscal debt burden, currently at 6% of GDP. However a lack of support in congress is undermining the initiative and led S&P to downgrade Costa Rica s credit rating. San José is an important hub for manufacturing and business process outsourcing (BPO) outsourcing. Accordingly, 40% of the office market is concentrated in Free Trade Zones and 70% is contained in enclosed business and/or industrial parks. 73,000 m 2 of office space were delivered to the market, a significant amount for San José. Demand was fairly strong at 51,000 m 2, a considerable increase over the 38,000 m 2 of demand seen last year. Vacancy has continued to rise from 15% to 16.3% this year, and should keep rising over the next two years as production will increase. High production has put pressure on Class A landlords, forcing them to lower their rents. In many parts of the city there is almost no gap between Class A and Class AB rents. Total stock (m²) 1,035,000 Overall vacancy rate 16.3% Production (m²) 73,000 Net absorption 2015 (m²) 51,000 Expected production 2016 (m²) 77,000 Expected net absorption 2016 (m²) 56,000 Class A rental range (USD/m²/mo.) $15 23 Class AB/B+ rental range (USD/m²/mo.) $14-21 Average purchase price range (USD/m²) $2,000 3,000 Historic production, absorption, and rents $25 Forecast $20 $15 $10 Class A (USD/m2/month) $5 Class AB (USD/m2/month) $-

25 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Ecuador - Quito A devastating earthquake near the city of Manta as well as falling oil prices have combined to sharply derail the Ecuadorean economy in The government has raised taxes to supplement the USD $1 billion in donations it has received for the reconstruction of the affected areas. Plummeting oil revenues have left Ecuador with a shortage of dollars. Foreign exchange reserves barely cover two months of imports. However higher interest rates and cautious monetary policy have induced households to build up their bank deposits this year. To keep the fiscal deficit under control the government is selling assets such as oil inventories, imposing rising tariffs on imported products, raising taxes, and cutting public investment. The deficit is at a 20-year high and is expected to exceed 6% of GDP in Ecuador issued its first government bonds since 2008 last year, raising $2 billion. However borrowing costs remain very high. Total stock (m²) 1,342,000 Overall vacancy rate 3.2% Production (m²) 71,000 Net absorption 2015 (m²) 83,000 Expected production 2016 (m²) 76,000 Expected net absorption 2016 (m²) 70,000 Class A rental range (USD/m²/mo.) $16 23 Class AB/B+ rental range (USD/m²/mo.) $10 18 Average purchase price range (USD/m²) $1,200 2,300 Stock and vacancy by submarket Quito is one of the few markets where demand outpaced supply in 2015; the 71,000 m 2 of new supply were met with 83,000 m 2 in net absorption. Although vacancy increased from 2.4% in 2014 to 3.2% in 2015, Quito still demonstrates the lowest vacancy rate in the region. Another 250,000 m 2 of space will be completed by the end of This will push vacancy up and put downward pressure on rents. Top properties in Quito are commanding USD $23/m 2 /month while Class AB properties are charging between USD $10-18/m 2 /month. Since Ecuador uses the US Dollar as its currency, there has not been a strong downturn in rents like in other countries Amazonas Norte Amazonas Sur 12 de Octubre Republica Republica El Salvador Stock Vacancy Cumbaya 20% 15% 10% 5% 0%

26 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Ecuador - Guayaquil A devastating earthquake near the city of Manta as well as falling oil prices have combined to sharply derail the Ecuadorean economy in The government has raised taxes to supplement the USD $1 billion in donations it has received for the reconstruction of the affected areas. Plummeting oil revenues have left Ecuador with a shortage of dollars. Foreign exchange reserves barely cover two months of imports. However higher interest rates and cautious monetary policy have induced households to build up their bank deposits this year. To keep the fiscal deficit under control the government is selling assets such as oil inventories, imposing rising tariffs on imported products, raising taxes, and cutting public investment. The deficit is at a 20-year high and is expected to exceed 6% of GDP in Ecuador issued its first government bonds since 2008 last year, raising $2 billion. However borrowing costs remain very high. Total stock (m²) 518,000 Overall vacancy rate 6.4% Production (m²) 32,000 Net absorption 2015 (m²) 37,000 Expected production 2016 (m²) 34,000 Expected net absorption 2016 (m²) 28,000 Class A rental range (USD/m²/mo.) $15 20 Class AB/B+ rental range (USD/m²/mo.) $10-$17 Average purchase price range (USD/m²) $3,300 4,400 Stock and vacancy by submarket Guayaquil is another of the few markets where demand outpaced supply in 2015; 32,000 m 2 in new production were met with 37,000 m 2 of demand. New production will stay steady over the next two years with approximately 30,000 m 2 of area expected to be completed in each of the next two years. Vacancy is currently at 6.4%, and is highest in the Samborondon submarket at 8.3%. The most consolidated submarket is Kennedy, where nearly half the market is located. Rents in Kennedy are the highest in the city, ranging from $17-20/m 2 /month Stock Vacancy Kennedy Centro Urdesa/Ceibos Samborondon 20% 15% 10% 5% 0%

27 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Guatemala Guatemala City The Guatemalan economy has been stable over the past few years, rarely seeing the highs or lows of neighbors like Panama. The economy maintained a 4% growth rate in 2015, roughly equal to one year ago. Consumer spending and investment are expected to grow as a portion of GDP in the medium-term. In 2015 Guatemala was rocked by the La Linea scandal, one of the largest cases of corruption yet seen in the Central American nation. In this affair top government officials were taking kickbacks from importers via the customs authority in exchange for preferential access for their goods. The scandal lead to the ouster of the president and vice president. The La Linea affair had deep political ramifications. In the election of September 2015, Guatemalans voted for comedian Jimmy Morales, a man with no prior political experience. The election was a clear show of discontent with the nation s political establishment. Total stock (m²) 510,000 Overall vacancy rate 6.0% Production (m²) 18,000 Net absorption 2015 (m²) 15,000 Expected production 2016 (m²) 16,000 Expected net absorption 2016 (m²) 10,000 Class A rental range (USD/m²/mo.) $9 11 Class AB/B+ rental range (USD/m²/mo.) $8 10 Average purchase price range (USD/m²) $1,000 1,500 Guatemala City boasts the lowest rents and sale prices for any major city in the western hemisphere. This is due to low demand and the predominance of low-cost operations such as call centers and business process outsourcing. Class A buildings invariably lease between $10-11/m 2 /month. In 2016 net absorption is expected to decrease, highlighted by the expected closure of Citibank s operations in Guatemala. However, the recovery in the US, Guatemala s top export market, should boost activity in the market. Approximately 50,000 m 2 of office will be completed between Stock distribution by submarket Stock - Class A Stock - Class AB Vacancy Americas Proceres Reforma Others 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

28 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Mexico Mexico City The Mexican economy was somewhat sluggish in 2015, hampered by slowing manufacturing activity. Since Mexican manufacturers produce so many supply chain goods for US companies, the strong dollar has hurt them because it has dampened demand for US exports, which are now more expensive around the world. While the export sector has struggled, indicators on the domestic front remain positive. Employment, real wages, and credit access are all on the rise, and consumer confidence remains resilient. The Mexican Peso is among the global currencies caught up in the recent turmoil of the financial markets. The currency saw a 14% drop in 2015 and continued to fall throughout the first half of This has created inflationary pressures as imports are now more costly. In response Banxico, the Mexican Central Bank, raised the policy interest rate 50 bp to 3.75%, and it is likely to announce additional hikes in tandem with the US interest rate saw record absorption in Mexico City as over 470,000 m 2 were leased, including 135,000 m 2 for Bancomer/BBVA s new headquarters. In fact one third of net absorption in all of Latin America for the year happened in Mexico City. Over 1,000,000 m 2 will be delivered in Mexico City from Vacancy has risen Y-o-Y from 11% in 2014 to 12% in Rents saw increases in the submarkets located to the south and west of the city. On the whole it is likely that they will show a downward trend due to the immense amount of supply in the pipeline. Many landlords have begun quoting rents in Mexican Pesos due to exchange rate volatily. Total stock (m²) 5,624,000 Overall vacancy rate 12% Production (m²) 675,000 Net absorption 2015 (m²) 470,000 Expected production 2016 (m²) 476,000 Expected net absorption 2016 (m²) 344,000 Class A rental range (USD/m²/mo.) $22 28 Class AB/B+ rental range (USD/m²/mo.) $18-21 Average purchase price range (USD/m²) $2,500 6,600 *Exchange rate fluctuations have made prices fall considerably in USD. For this report JLL uses an exchange rate of 17 MXN/USD. Vacancy and absorption by submarket Availability Net Demand 35% 30% 25% 20% 15% 10% 5% 0%

29 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Mexico Monterrey The Mexican economy was somewhat sluggish in 2015, hampered by slowing manufacturing activity. Since Mexican manufacturers produce so many supply chain goods for US companies, the strong dollar has hurt them because it has dampened demand for US exports, which are now more expensive around the world. While the export sector has struggled, indicators on the domestic front remain positive. Employment, real wages, and credit access are all on the rise, and consumer confidence remains resilient. The Mexican Peso is among the global currencies caught up in the recent turmoil of the financial markets. The currency saw a 14% drop in 2015 and continued to fall throughout the first half of This has created inflationary pressures as imports are now more costly. In response Banxico, the Mexican Central Bank, raised the policy interest rate 50 bp to 3.75%, and it is likely to announce additional hikes in tandem with the US interest rate. Net absorption increased from 42,000 m 2 in 2014 to 68,000 m 2 in Demand has been driven by a flight to quality trend as tenants take advantage of favorable market conditions. Many landlords have begun quoting rents in Mexican Pesos due to exchange rate volatility. When stated in local currency, rents have been stable and haven t changed much since Monterrey is one of the few markets in Latin America that has experienced falling vacancy over the past few years. This comes as a consequence of Mexico s and particularly northern Mexico s strong trade ties with the United States and therefore its correlation to the US recovery. As Monterrey is Mexico s top manufacturing city, its real estate market has gained momentum over the past few years. Total stock (m²) 1,075,000 Overall vacancy rate 17,9% Production (m²) 47,000 Net absorption 2015 (m²) 68,000 Expected production 2016 (m²) 143,000 Expected net absorption 2016 (m²) 75,000 Class A rental range (USD/m²/mo.) $18 23 Class AB/B+ rental range (USD/m²/mo.) $12-17 Average purchase price range (USD/m²) $2,000 3,500 *Exchange rate fluctuations have made prices fall considerably in USD. For this report JLL uses an exchange rate of 17 MXN/USD. Stock, vacancy, and rents by submarket Stock Net Absorption Vacancy (%) Country Centro/ Obispado Santa Maria/ San Jeronimo Valle Valle Oriente 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

30 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Mexico Guadalajara The Mexican economy was somewhat sluggish in 2015, hampered by slowing manufacturing activity. Since Mexican manufacturers produce so many supply chain goods for US companies, the strong dollar has hurt them because it has dampened demand for US exports, which are now more expensive around the world. While the export sector has struggled, indicators on the domestic front remain positive. Employment, real wages, and credit access are all on the rise, and consumer confidence remains resilient. The Mexican Peso is among the global currencies caught up in the recent turmoil of the financial markets. The currency saw a 14% drop in 2015 and continued to fall throughout the first half of This has created inflationary pressures as imports are now more costly. In response Banxico, the Mexican Central Bank, raised the policy interest rate 50 bp to 3.75%, and it is likely to announce additional hikes in tandem with the US interest rate. With vacancy relatively low in Guadalajara, companies looking for large spaces will most likely need to pre-lease in a building under construction. 25% of the area under construction has already been reserved. Approximately 310,000 m 2 are expected to be delivered from , nearly tripling the size of the market. Rents have been stable through As the Guadalajara market is relatively tight, there has been little pressure on landlords to lower rents. This should change in the context of high future production. The vast majority of the office market is contained in Puerto de Hierro, a large master-planned neighborhood in the northeast of the city. This submarket contains over half of the existing stock and over half the new construction in the city. Total stock (m²) 180,000 Overall vacancy rate 9.3% Production (m²) 2,000 Net absorption 2015 (m²) 12,000 Expected production 2016 (m²) 93,000 Expected net absorption 2016 (m²) 70,000 Class A rental range (USD/m²/mo.) $19 26 Class AB/B+ rental range (USD/m²/mo.) $15-20 Average purchase price range (USD/m²) $2,500 3,500 *Exchange rate fluctuations have made prices fall considerably in USD. For this report JLL uses an exchange rate of 17 MXN/USD. Stock, production, and vacancy by submarket Stock Under Construction Planned Americas Lopez Mateos Puerta de Hierro Vallarta 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

31 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Panama Panama City Panama s economy remains the fastest growing in Latin America, though it has slowed since 2014 as weakened global trade has reduced canal fees and warehousing activity along the canal. Several large infrastructure projects are expected to finish in 2016, including the Panama Canal expansion and the Tocumen Airport expansion. While many see these projects as necessary to improve the country s productivity, it has significantly increased government debt. Panama is fighting the OECD s push for universal adoption of the Common Reporting Standards (CRS), which would require host nations to obtain all company information from their financial institutions and share it with other nations. Panama earns considerable foreign investment by being a financial safe haven, thus the CRS could undermine its status as a global financial hub. The recent scandal surrounding the Panama Papers has led nations around the world to further pressure Panama to adapting the CRS, and this could have important long-term implications. Total stock (m²) 1,268,000 Overall vacancy rate 45.3% Production (m²) 196,000 Net absorption 2015 (m²) 80,000 Expected production 2016 (m²) 168,000 Expected net absorption 2016 (m²) 78,000 Class A rental range (USD/m²/mo.) $15-28 Class AB/B+ rental range (USD/m²/mo.) $16-23 Average purchase price range (USD/m²) $2,100 3,200 Historic production, absorption, and vacancy Production remained high in 2015 with approximately 196,000 m 2 of space delivered to the market. However demand was again weaker than expected at 78,000 m 2. The gap between new supply and demand pushed vacancy up to 45%, one of the highest vacancy rates in the world. This could increase even further in 2016 as another 168,000 m 2 are expected to be completed. Beyond 2016 the supply pipeline will dry up almost completely. This is an indication that investors are growing weary of high vacancy and lagging demand Production (m2) Absorption (m2) (%) Forecast 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Rents have fallen over the past year, especially in Class A buildings in Obarrio where absorption has been very low.

32 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Peru - Lima The Peruvian economy performed above expectations in 2015 on the backs of consumer spending and expansionary fiscal policy. It remains one of the strongest performers in the region. Inflation has increased slightly as a result of a weaker exchange rate, rising import prices, and low agricultural output caused by the El Niño weather phenomenon. The Central Bank is raising its policy rate aggressively now at 4.25% - to counteract inflation. The Humala administration passed a $1.6 billion countercyclical stimulus package in The bill contains a number of measures aimed at boosting consumer spending including temporary tax credits, gas subsidies, and more flexible pensions. Pedro Pablo Kuczynski a centrist economist pulled off a slim and shocking win over frontrunner Keiko Fujimori to become Peru s next president. As his party controls only 20 seats in Congress, he will face an uphill battle and will have to form many alliances to get things done. Lima experienced a record year of supply in 2015 as 287,000 m 2 of office space were delivered to the market. Considering the adverse conditions facing the export sector, demand was robust with approximately 120,000 m 2 of net absorption. The considerable gap between supply and demand caused vacancy to shoot up from 4.5% in 2014 to 14.8% at the end of This upward trajectory is likely to continue through 2017 as another 450,000 m 2 will be completed. Current market conditions are triggering a sharp fall in rents across the city. Average rents increased steadily from 2009 to 2013, however over the past 2 years average rents have diminished by nearly 20%. Total stock (m²) 1,485,000 Overall vacancy rate 14.8% Production (m²) 287,000 Net absorption 2015 (m²) 120,000 Expected production 2016 (m²) 245,000 Expected net absorption 2016 (m²) 100,000 Class A rental range (USD/m²/mo.)* $21-$25 Class AB/B+ rental range (USD/m²/mo.)* $18-$24 Average purchase price range (USD/m²) 2,000 3,000 *These rents include parking fees, which are quoted separately but are an obligatory cost for users, adding about USD $4/m 2 /month in monthly rent Historic production, absorption, and vacancy - Production (m2) Absorption (m2) Forecast 40% 35% 30% 25% 20% 15% 10% 5% 0%

33 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Puerto Rico San Juan Puerto Rico will see yet another year of economic contraction in The island's decade-long recession is driven by high operational costs, the expiration of an export tax break, and a crippling brain drain that has resulted from high unemployment. Public debt has grown to over $70 billion, equal to 70% of GDP. Puerto Rico spends an estimated 35% of its annual budget on servicing its debt. After a long-anticipated default on its debts in May, the US government finally stepped in to help provide a way forward. The proposed solution calls for a seven-person board that will make decisions about privatizing public companies and restructuring debt, with veto power over the island s government. A recent Zika outbreak is testing the government s overstretched and underfunded health infrastructure, with over 700 confirmed cases so far this year. San Juan s two most important office clusters are Hato Rey - which contains about 44% of the office stock - and Guaynabo, a newer submarket that offers larger floor plates, more parking, and less traffic congestion. Vacancy is lowest among Class A buildings (around 11%) and higher for Class B (19%) and Class C (30%). Class A buildings in Hato Rey have remained steady assets throughout the recession. The market continues to be tenant-favorable. Investors, users, and corporate clients are taking advantage, using sub-leases and early contract re-negotiations. With some Class A properties maintaining relatively high occupancy, investors are looking to take advantage of low asset prices to acquire properties that can provide a solid yield. Total stock (m²) 768,000 Overall vacancy rate 21.5% Production (m²) 0 Net absorption 2015 (m²) -12,000 Expected production 2016 (m²) 0 Expected net absorption 2016 (m²) -5,000 Class A rental range (USD/m²/mo.) $15 21 Class AB/B+ rental range (USD/m²/mo.) $13-20 Average purchase price range (USD/m²) $1,600 2,800 *Rents in San Juan are typically quoted in ft2, but are stated in m2 in this report for consistency and comparative purposes. Historic Production, Absorption, and Vacancy (10.000) (20.000) (30.000) (40.000) (50.000) Forecast Forecast Production (m2) Absorption (m2) Vacancy 25% 20% 15% 10% 5% 0%

34 Rentable Area (m2) JLL Latin America Office Market Overview Mid year Uruguay - Montevideo Weak external demand continues to plague Uruguay, as its largest trading partners Brazil and Argentina remain mired in recession. Lower export revenues and falling commodity prices caused the fiscal deficit to rise to 2.5% of GDP in Uruguay issued over USD $1.7 billion on the international bond market, which will give it flexibility to finance the budget deficit. Inflation has continued to increase recently (10.6% Y-o-Y in March), driven by the depreciation of the peso and the high degree of wage indexation. However it should stabilize in the short-term. The five year budget proposed by President Vasquez includes USD $12.3 billion to be spent on new infrastructure projects, as well as increased social spending and tax reforms. The government has been awarding more concessions to foreign entities in an effort to diversify the country s export mix. These investments include French-funded wind farms, Chinese-funded port and rail projects, and permits for large private mines. Total stock (m²) 291,000 Overall vacancy rate 5% Production (m²) 0 Net absorption 2015 (m²) 5,400 Expected production 2016 (m²) 0 Expected net absorption 2016 (m²) 7,000 Class A rental range (USD/m²/mo.) $29-35 Class AB/B+ rental range (USD/m²/mo.) $21-27 Average purchase price range (USD/m²) N/A Stock evolution, The Montevideo market continues to be very quiet. There was no production in 2015, nor is there any in the immediate horizon. There are, however, a few projects that are waiting for a commitment from a tenant to begin construction. Prime rents have remained steady over the past 24 months without much change. The vacancy rate has fallen to 5% from 7.4% a year ago Class A Class B+ Free Trade Zone

35 Price of Crude: USD per barrel VEF / USD JLL Latin America Office Market Overview Mid year Venezuela - Caracas Venezuela is projected to have the worst performing economy in the world in 2016, with analysts estimating an economic contraction of over 7%. An electricity shortage precipitated by the El Niño phenomenon which has lowered reserves at hydroelectric dams to worrying levels has taken a huge toll on the economy this year. The government has responded by mandating a 4 day workweek for the public, and a 2 day workweek for government employees. There is a fear among investors that Venezuela will default on its debt this year. With oil revenues so low and USD $10 billion in debt payments due in 2016, the government will have to choose between a default and printing money and sparking hyperinflation. The Socialist Party lost a critical election in November 2015, as the opposition swept into power by winning just under 2/3 of the seats in the National Assembly. The opposition has sworn to put pressure on President Maduro to bring about more moderate policies, though there is no guarantee he will acquiesce. Only 18,000 m 2 of office space in 2 buildings were delivered to the market will be far busier with long-anticipated projects Paseo La Castellana and Centro Empresarial Esmeralda nearing completion. Rents in Caracas are stated in local currency but are driven typically by the parallel exchange rate rather than the official rate. Since most foreign companies must use the official rate for accounting, they are seeing rents grow exponentially. Consequently, companies are preferring to purchase real estate than keep their profits in the volatile banking system and deal with the ambiguity of the rental market. In 2015 absorption in Caracas was dominated by property sales. Total stock (m²) 1,135,000 Overall vacancy rate 4.5% Production (m²) 18,000 Net absorption 2015 (m²) 11,000 Expected production 2016 (m²) 48,000 Expected net absorption 2016 (m²) 35,000 Class A rental range, Official FX (USD/m²/mo.) $1,000 3,000 Class AB/B+ rental range, Official FX (USD/m²/mo.) $400 1,500 Class A rental range, Parallel FX (USD/m²/mo.) $29 35 Class AB/B+ rental range, Parallel FX (USD/m²/mo.) $20 32 Average purchase price range, Parallel FX (USD/m²) $4,500-6,500 Average Price of purchase Crude price Oil and range, Exchange Parallel FX Rates (USD/m²) $3,000-$6, Price of Crude Oil (USD per barrel) Official Exchange Rate Parallel Exchange Rate