There was a nine-year peak in Chile's tight office market's vacancy rates during the first half of 2013. Jones Lang LaSalle found that between the end of 2012 to the end of June, empty office space increased by 3.7 percent. While Class A buildings have a vacancy rate of 3.4 percent, demand for Class A spaces is usually stronger at this time of year, the industry says. for rent
Panama has the highest vacancy rate in Latin America, at 29.8 percent, with a far lower vacancy rate in the country than other countries in the region.
Office space construction in Chile was roughly 67,000 square meters in the first six months, which is in line with the same period last year. There have been delays on a few projects, including Parque Titanium II, Nueva Apoquindo I, III, and Plaza Manquehu, according to the firm, and these are expected to be completed in the second half of the year along with regular supplies.
There are roughly 2,750,000 square meters of office space available in Santiago, making it Latin America's third largest office market behind Mexico City and Sao Paulo.
According to the study, "this stock is smaller than 2012's year-end report due to the downgrading to Class C of some buildings based on degradation and floor subdivisions." Class C houses do not fall under the definition of corporate-standard stock.
A total of 37,000 square meters of Class A space was given by Patio Foster and Cerro el Plomo 6000, both in the Las Condes submarket, with a considerable amount of space already pre-leased in each building. Class AB structures provided by Las Condes, Providencia, and Santiago Centro, as well as two buildings in the Huechuraba submarket accounted for the remaining 30,000 square meters, according to JLL.
Pre-leased Class A office space and leases in buildings completed in the latter two quarters of 2012 accounted for the majority of absorption in the first half of 2013.
Additionally, the study found that demand for corporate-standard office space from both international and domestic investors and funds supported capital market activity. A total of 27,000 square meters of Class A buildings was purchased for almost $135 million. Class AB office space of more than 22,000 square meters was sold for $80 million.
Completely-owned buildings are becoming more popular, according to JLL, while the number of deals involving specific floors or offices drops.
Class A and AB space is scheduled to be generated at a rate of roughly 260,000 square meters per year for the remainder of the year. Over 170,000 square meters of supply is scheduled to be delivered by over ten Class A buildings in the Santiago Centro, Providencia, and Vitacura submarkets, but predominantly in the Las Condes submarket.
Increased supply in the next six months might turn Santiago into a renter's market, impacting rental rates in the process.
Vacancy might grow to close to 7% by year's end, the highest level in ten years, according to JLL, which predicts the biggest-ever annual supply for the Santiago office market.