Chile Real Estate Report Q1 2013

Publisher Name :
Date: 12-Dec-2012
No. of pages: 56

The Chile Real Estate report examines the commercial office, retail, industrial and construction sectors in

the country in the context of a historically buoyant market, whose slowing economic growth looks set to

cool the commercial real estate market.

With a focus on the principal cities of Santiago and Valdivia, the report covers the rental market

performance in terms of rates and yields over the past 18 months and examines how best to maximise

returns in the commercial real estate market, while minimising investment risk and exploring the dynamic

supply and demand landscape: in spite of new supply, absorption rates are generally holding up across the

board. Increasing demand and supply is the general trend across all commercial real estate sub-sectors,

and as a result, rents are mostly increasing. The country's status as Latin America's most prosperous

region has helped it retain stability and caused it to become a target destination for people looking to enter

into a more predictable market than the eurozone in particular.

However, even in Chile - where growth over the past two years has been strong in the office, retail and

industrial sub-sectors - current global economic woes may yet take their toll. Our most recent round of

in-country interviews, conducted in July 2012, indicate that rental growth is likely to be much slower, or

to come to a halt altogether. This is unsurprising in the face of a cautious market for international

investment, and it is still a testament to the country's stability that no declines are expected.

Key Points:

Although strong economic activity in the first half of 2012 exceeded our expectations, we do not

expect this trend to continue. We see Chilean private consumption growth slowing in the second

half of the year, which will contribute to a deceleration in economic growth. Indeed, we already

see signs that a slowdown is under way in the export sector. We currently forecast a general

slowing in real GDP growth from 5.6% in 2011 to 4.8% in 2012.

Chile is well-placed for growth in the construction sector, with strong fundamentals and a good

business environment. However, the high base rates seen over the past few years are

unsustainable, and growth rates are slowing to low single digits, with year-on-year (y-o-y)

growth of 2.8% expected for 2012. This is anticipated to improve over the longer term, with

annual average growth of 3.7% forecast between 2013 and 2021. The construction industry is

expected to increase in value, from US$18.6bn in 2012 to US$39.6bn in 2021.

With a number of projects and concessions going to tender from 2013, as well as strong growth

reported in H112, we have revised up our medium-term outlook for Chile's construction sector.

We anticipate strong interest in a number of airport concessions due between 2013 and

2015, given Chile's well regulated and low-risk business environment. At the same time, tenders

for a range of transport projects should bolster value creation for the overall construction sector.

Chile Real Estate Report Q1 2013

Executive Summary ........................................................................................................................................ 5
SWOT Analysis ............................................................................................................................................... 6
Chile Real Estate/Construction SWOT .................................................................................................................................................................. 6
Chile Political SWOT ............................................................................................................................................................................................ 7
Chile Economic SWOT ......................................................................................................................................................................................... 8
Chile Business Environment SWOT ...................................................................................................................................................................... 9
Real Estate Market Overview ........................................................................................................................ 10
Real Estate Market Analysis - Office ........................................................................................................... 13
Rents And Yields ................................................................................................................................................................................................. 13
Table: Historic Rents - 2011-2012 (US$ per m2/month) ..................................................................................................................................... 14
Table: Net Yield, 2011-H112 (%) ....................................................................................................................................................................... 14
Table: Terms Of Rental Contract/ Leases - H112 .............................................................................................................................................. 14
Industry Forecast Scenario ...................................................................................................................................................................................... 14
Table: Forecast Rents - (US$ per m2/month) ...................................................................................................................................................... 15
Table: Forecast Net Yield, 2010-2017 (%) ......................................................................................................................................................... 15
Real Estate Market Analysis - Retail ........................................................................................................... 16
Supply And Demand ............................................................................................................................................................................................ 16
Rents And Yields ................................................................................................................................................................................................. 16
Table: Historic Rents - 2011-2012 (US$ per m2/month) ..................................................................................................................................... 17
Table: Net Yield, 2011-2012 (%) ........................................................................................................................................................................ 17
Table: Terms Of Rental Contract/Lease - H112 ................................................................................................................................................. 18
Industry Forecast Scenario ...................................................................................................................................................................................... 18
Table: Forecast Rents - (US$ per m2/month) ...................................................................................................................................................... 18
Table: Forecast Net Yield, 2010-2017 (%) ......................................................................................................................................................... 18
Table: Chile Retail Sales Indicators, 2009-2016 ................................................................................................................................................ 19
Real Estate Market Analysis - Industrial..................................................................................................... 20
Supply And Demand ............................................................................................................................................................................................ 20
Rents And Yields ................................................................................................................................................................................................. 20
Table: Historic Rents - 2011-2012 (US$ per m2/month) ..................................................................................................................................... 21
Table: Net Yield, 2011-2012 (%) ........................................................................................................................................................................ 21
Table: Terms Of Rental Contract/Leases - H112 ............................................................................................................................................... 22
Industry Forecast Scenario ...................................................................................................................................................................................... 22
Table: Forecast Rents - (US$ per m2/month) ...................................................................................................................................................... 22
Table: Forecast Net Yield, 2010-2017 (%) ......................................................................................................................................................... 22
Forecast Scenarios ....................................................................................................................................... 23
Infrastructure Report ............................................................................................................................................................................................... 23
Table: Chile Construction And Infrastructure Industry Data, 2009-2016 ............................................................................................................ 23
Table: Chile Construction And Infrastructure Long-Term Forecasts, 2014-2021 ............................................................................................... 24
Construction And Infrastructure Forecast Scenario ........................................................................................................................................... 24
Macroeconomic Outlook .......................................................................................................................................................................................... 27
Table: Chile - Economic Activity ........................................................................................................................................................................ 29
Real Estate Risk/Reward Ratings ................................................................................................................ 30
Real Estate/Construction Risk/Reward Ratings ....................................................................................................................................................... 30
Table: Real Estate Risk/Reward Ratings ............................................................................................................................................................. 30
Chile's Business Environment .................................................................................................................................................................................. 30
Table: BMI Business And Operation Risk Ratings .............................................................................................................................................. 31
Institutions .......................................................................................................................................................................................................... 31
Table: BMI Legal Framework Rating ................................................................................................................................................................. 32
Infrastructure ...................................................................................................................................................................................................... 34
Table: Labour Force Quality .............................................................................................................................................................................. 36
Table: Trade And Investment Ratings ................................................................................................................................................................. 38
Operational Risk ................................................................................................................................................................................................. 40
Competitive Landscape ............................................................................................................................... 41
Company Profiles ......................................................................................................................................... 43
Abertis................................................................................................................................................................................................................. 43
Besalco ............................................................................................................................................................................................................... 44
Grupo ACS .......................................................................................................................................................................................................... 45
Demographic Data ........................................................................................................................................ 46
Table: Chile's Population By Age Group, 1990-2020 ('000) ............................................................................................................................... 47
Table: Chile's Population By Age Group, 1990-2020 (% of total) ....................................................................................................................... 48
Table: Chile's Key Population Ratios, 1990-2020 .............................................................................................................................................. 49
Table: Chile's Rural And Urban Population, 1990-2020 .................................................................................................................................... 49
BMI Methodology .......................................................................................................................................... 50
How We Generate Our Industry Forecasts .............................................................................................................................................................. 50
Construction Industry .............................................................................................................................................................................................. 51
Bank Lending ........................................................................................................................................................................................................... 52
Real Estate/Construction Business Environment Rating .......................................................................................................................................... 52
Table: Weighting Of Indicators........................................................................................................................................................................... 53
Sources..................................................................................................................................................................................................................... 55Executive Summary ........................................................................................................................................ 5
SWOT Analysis ............................................................................................................................................... 7
China Consumer Electronics Market SWOT ......................................................................................................................................................... 7
China Electronics Industry SWOT ........................................................................................................................................................................ 8
China Political SWOT ........................................................................................................................................................................................... 9
China Economic SWOT ...................................................................................................................................................................................... 10
China Business Environment SWOT ................................................................................................................................................................... 11
Asia Pacific Risk/Reward Ratings ................................................................................................................ 12
Table: Asia Pacific CE Risk/Reward Ratings, Q113 ........................................................................................................................................... 15
Market Overview ........................................................................................................................................... 16
Government Authority ......................................................................................................................................................................................... 16
Computers ........................................................................................................................................................................................................... 16
Table: Computers: Demand, 2010-2017 ............................................................................................................................................................. 16
AV ....................................................................................................................................................................................................................... 22
Table: AV: Demand, 2010-2017 ......................................................................................................................................................................... 22
Mobile Handsets ................................................................................................................................................................................................. 24
Table: Handsets: Demand, 2010-2017................................................................................................................................................................ 24
Consumer Electronics Industry ................................................................................................................... 28
Table: IT Industry Overview, 2009-2016 ............................................................................................................................................................ 28
Table: China's IT & Electronics Industry Revenue Breakdown By Sector, 2011 ................................................................................................. 29
Table: China's IT & Electronics Industry Output Breakdown By Product .......................................................................................................... 29
Table: Semiconductors Demand, 2010-2017 ...................................................................................................................................................... 30
Computers ................................................................................................................................................................................................................ 31
Table: Computers, Production, 2010-2017 ......................................................................................................................................................... 31
Video, Audio And Gaming .................................................................................................................................................................................. 31
Table: AV: Production, 2010-2017, (mn) ............................................................................................................................................................ 31
Table: China TV set production April 2011 - March 2012, (Units, 000) ............................................................................................................. 32
Mobile Handsets ................................................................................................................................................................................................. 33
Table: Handsets, Production, 2010-2017, (mn) .................................................................................................................................................. 33
Industry Forecast Scenario .......................................................................................................................... 34
Table: Consumer Electronics Overview, 2010-2017, (US$mn) ............................................................................................................................ 35
Industry Developments ................................................................................................................................ 36
Macroeconomic Forecast ............................................................................................................................. 38
Table: China - Economic Activity, 2011-2016 .................................................................................................................................................... 40
Competitive Landscape ............................................................................................................................... 41
Computers ........................................................................................................................................................................................................... 41
Handsets ............................................................................................................................................................................................................. 45
AV ....................................................................................................................................................................................................................... 48
Domestic Company Profiles ......................................................................................................................... 50
Semiconductor International Manufacturing Corp Public: HKEX, NYSE ........................................................................................................... 50
Lenovo ................................................................................................................................................................................................................ 52
Country Snapshot ......................................................................................................................................... 54
Table: China's Population By Age Group, 1990-2020 ('000) ............................................................................................................................... 55
Table: China's Population By Age Group, 1990-2020 (% of total) ..................................................................................................................... 56
Table: China's Key Population Ratios, 1990-2020 ............................................................................................................................................. 57
Table: China's Rural And Urban Population, 1990-2020 ................................................................................................................................... 57
BMI Methodology .......................................................................................................................................... 58
How We Generate Our Industry Forecasts ......................................................................................................................................................... 58
Electronics Industry ............................................................................................................................................................................................ 58
Sources ............................................................................................................................................................................................................... 59Executive Summary ........................................................................................................................................ 5
SWOT Analysis ................................................................................................................................................ 7
Colombian IT Sector SWOT .................................................................................................................................................................................. 7
Colombian Telecoms Industry SWOT ................................................................................................................................................................... 8
Colombia Political SWOT ..................................................................................................................................................................................... 9
Colombia Economic SWOT .................................................................................................................................................................................. 9
Colombia Business Environment SWOT ............................................................................................................................................................. 10
Americas Risk/Reward Ratings .................................................................................................................... 11
Table: Americas IT Risk/Reward Ratings ........................................................................................................................................................... 13
Americas IT Markets Overview ..................................................................................................................... 14
IT Penetration .......................................................................................................................................................................................................... 14
Market Growth And Drivers .................................................................................................................................................................................... 16
Sectors And Verticals ............................................................................................................................................................................................... 18
Market Overview ............................................................................................................................................ 22
Government Authority .............................................................................................................................................................................................. 22
Hardware ................................................................................................................................................................................................................. 22
Software ................................................................................................................................................................................................................... 26
Services .................................................................................................................................................................................................................... 28
Industry Developments............................................................................................................................................................................................. 30
Incentives For Offshoring Investment ...................................................................................................................................................................... 32
Industry Forecast .......................................................................................................................................... 34
Table: Colombia IT Sector - Historical Data & Forecasts (US$mn Unless Otherwise Stated), 2010-2017 ........................................................ 37
Industry Forecast Internet ....................................................................................................................................................................................... 38
Table: Internet - Historical Data And Forecasts ................................................................................................................................................ 38
Competitive Landscape ................................................................................................................................ 40
Hardware ................................................................................................................................................................................................................. 40
Software ................................................................................................................................................................................................................... 41
IT Services ............................................................................................................................................................................................................... 43
Internet Competitive Landscape............................................................................................................................................................................... 46
Macroeconomic Forecast .............................................................................................................................. 47
Table: Colombia - GDP By Expenditure, Real Growth %, 2008-2016................................................................................................................ 48
Company Profiles .......................................................................................................................................... 49
IBM ..................................................................................................................................................................................................................... 49
Dell ..................................................................................................................................................................................................................... 54
Table: Selected Dell Mergers And Acquisitions .................................................................................................................................................. 59
Hewlett-Packard ................................................................................................................................................................................................. 60
Country Snapshot ......................................................................................................................................... 66
Table: Colombia's Population By Age Group, 1990-2020 ('000) ......................................................................................................................... 67
Table: Colombia's Population By Age Group, 1990-2020 (% of total) ................................................................................................................ 68
Table: Colombia's Key Population Ratios, 1990-2020 ....................................................................................................................................... 69
Table: Colombia's Rural And Urban Population, 1990-2020 .............................................................................................................................. 69
BMI Methodology .......................................................................................................................................... 70
How We Generate Our Industry Forecasts ......................................................................................................................................................... 70
IT Industry .......................................................................................................................................................................................................... 70
IT Ratings - Methodology ................................................................................................................................................................................... 71
Table: IT Business Environment Indicators ........................................................................................................................................................ 72
Weighting ............................................................................................................................................................................................................ 73
Table: Weighting Of Components ....................................................................................................................................................................... 73
Sources ............................................................................................................................................................................................................... 73BMI Industry View ........................................................................................................................................... 5
SWOT Analysis .................................................................................................................
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