Occupier insight navigating emerging markets 2013 #cre

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Occupier insight navigating emerging markets 2013 #cre

  1. 1. 2013 Occupier Insight Navigating EMERGING Markets A Corporate Occupier & Investor Services Publication
  2. 2. Navigating EMERGING Markets INTRODUCTION The potential for slow economic growth is expected to hamper expansion in North America and the euro zone. As a result, multinationals are consistently turning to emerging markets in search of revenue. Rapidly growing populations, an increasingly educated workforce, expanding middle-class incomes, and substantial foreign and domestic investment are all compelling arguments for corporate expansion in these markets. In our latest Occupier Insight Report, we discuss the risks associated with occupancy and expansion in emerging economies. This report identifies 43 countries across Latin America, Africa, the Middle East, and Asia Pacific where global companies are contemplating expansion. In this piece, we discuss the key considerations for multinationals when assessing a market’s suitability for occupancy, identify the economic indicators that should be assessed in determining risk, and examine the current state and prospects of the property market. We hope you find this information useful and informative. Please do not hesitate to contact Cushman & Wakefield’s Global Occupier Services leadership, or the authors of this report should you require a deeper assessment of the trends discussed in the piece. Mark T. Wanic Americas Head of Occupier Services John C. Santora President and CEO Corporate Occupier & Investor Services Michael Creamer EMEA Head of Occupier Services Richard Middleton APAC Head of Occupier Services CUSHMAN & WAKEFIELD 1
  3. 3. Navigating EMERGING Markets CUSHMAN & WAKEFIELD 2 Economic Perspective Emerging AND BRIC Markets are a Force in the Global Economy Ken McCarthy, Chief Economist, Cushman & Wakefield Over the past two decades emerging markets have become an increasingly important part of the global economy, first as manufacturing locations for global corporations that sought to outsource production to reduce costs, and now as markets for goods in their own right as incomes have increased and a middle class has emerged in many of these countries. For the past 22 years, a group of 54 nations identified by Oxford Economics as Emerging Markets and including countries like the BRIC economies (Brazil, Russia, India, China) as well as developing economies like Bangladesh, Egypt, Namibia, Jamaica andVietnam to name just a few, has grown much more rapidly than the rest of the world. Since 1990, GDP in these emerging markets as a group has grown at an average annual rate of 9.9% while the rest of the world has grown at less than half that pace or roughly 4.2% per year. In 1990 the GDP of China, arguably the world’s first and leading emerging market economy, was roughly $388 billion and represented approximately 1.7% of global GDP.Today China has the second largest economy in the world and accounts for about 11.5% of global GDP.As a result, emerging markets now account for almost 35% of global GDP and are a potent factor in the global economy that can no longer be ignored. Trade with these nations has also grown rapidly.Their impact on the global economy can be seen in the growing share of global trade in goods that these countries represent. According to the IMF, exports from emerging and developing nations have grown at a compound annual rate of 15.5% since 2003, more than twice the rate of the rest of the world. As a result, today these nations account for approximately 44.5% of total world exports. In 2003 these nations accounted for only 26.7% of world exports.This increasing share of global trade means these nations are becoming more and more integrated into the global economy. Over the next several years, as the global economy becomes ever more integrated, corporations will need to be in more locations than ever. Any business that ignores emerging markets will be missing out on the fastest growing part of the global economy. 26.7% 28.4% 31.1% 33.0% 33.9% 36.6% 35.3% 37.4% 39.1% 40.7% 20% 25% 30% 35% 40% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sources: World Trade Organization, International Monetary Fund Emerging and Developing Nations’ Exports as a Percent of World Exports
  4. 4. Navigating EMERGING Markets CUSHMAN & WAKEFIELD 3 Assessing the RISKS OF CORPORATE EXPANSION Given the juxtaposition of significant GDP growth and the high levels of instability and risk in many foreign markets, corporations must weigh a variety of risks to determine the suitability of each market. Below are some of the key issues that any real estate department must consider when analyzing location opportunities. impact on total occupancy costs Given the limited supply of already built property, as well as the lack of infrastructure in many remote markets to support new construction, rental rates for multinationals will be high relative to their total portfolio. Some of the world’s highest rents can be found in São Paulo, Rio de Janeiro, Luanda, and Abuja, where prime rental rates can top long-established and mature markets such as New York, London, Paris and Tokyo. For real estate departments trying to control expenses across their portfolios, the impact of the occupancy cost in these markets to their broader portfolio should be examined. quality of ownership In many of these markets, it can be challenging to find property owners with the professional experience, knowledge, and financial capital to serve the modern corporation. While REITs, private equity investors, and other institutional owners have been investing in many of these markets for some time, the percent of stock these organizations own and operate remains small in relation to the broader inventory. In the more established growth markets, finding professional ownership is less of a challenge. In many countries, ownership is held by families or individuals and can be multi generational, making it challenging to negotiate leases and building improvements. Transparency of property rights AND LAND USE In some countries, corporations are not legally allowed to own real estate. In others, owners have the right to negotiate rental rates annually over the course of a lease term. Knowing up-front the legal framework for how the corporation is allowed to acquire and operate real estate is essential. Investment in infrastructure Assessing the state of the broader infrastructure is critical. In established markets the quality of the infrastructure can be excellent, and in some cases even better than domestic markets. In others, there can be issues with such basic things as roads, schools, hospitals, and the banking system. Corporations need to know if there is adequate law enforcement, government spending and legal protection and they should ask such basic questions as how will employees live and travel to and from work? The state of the infrastructure determines how easy it will be to conduct daily business operations. Health & safety of employees From basic issues such as securing clean water and efficient energy, to complying with western and/ or corporate standards for materials, fire, safety, and security, multinationals can be challenged to find facilities that provide acceptable work environments for their employees. Many corporations have additional requirements related to social responsibility and sustainability, further increasing costs and limiting the amount of available stock. Level of corruption Corruption makes it hard for corporations to operate and for economies to fully develop. It stifles trade, investment, and economic development. From bribery, to taxation and the threat of government overthrow, corruption can be a significant issue in some markets. The more mature markets, such as China, India, and Saudi Arabia have made significant progress in reducing their levels of corruption. In other markets, such as Sudan, Myanmar, Zimbabwe, Mexico, and Venezuela, corruption makes it extremely difficult to operate a business with any level of assurance. In many emerging markets, it can be challenging to find property owners with the experience, knowledge and capital to construct office buildings that meet the needs of today’s corporations.
  5. 5. Country overviews Navigating EMERGING Markets CUSHMAN & WAKEFIELD 4 As corporations explore new markets, an understanding of risk must weigh into their expansion strategies. We have identified a number of issues – from the level of corruption, to the quality of infrastructure, transparency of property rights, and class of ownership – that should be considered. As real estate departments support corporate expansion priorities, they face a daunting task in helping make sense of these risks and opportunities. In the following sections of this report, we provide an overview of the key economic indicators, risk rankings and property markets for the 43 countries noted below. The global map below is interactive. By clicking on a specific region, you will be led to an overview of the key trends for that region, followed by a region map. On the map, click on each country to receive a detailed description of the criteria best used to determine the suitability of that country for corporate expansion. CENTRAL & SOUTH AMERICA (7) Argentina Brazil Chile Colombia Mexico Peru Venezuela AFRICA & MIDDLE EAST (25) Algeria Angola Botswana Cote D’Ivoire Democratic Republic of Congo Egypt Ghana Kenya ASIA PACIFIC (11) China India Indonesia Philippines Thailand Vietnam Bangladesh Cambodia Mongolia Myanmar Sri Lanka Libya Morocco Nigeria Senegal South Africa Tanzania Tunisia Uganda Zambia Zimbabwe Bahrain Jordan Lebanon Oman Qatar Saudi Arabia UAE INTERACTIVE GLOBAL MAP WITH HIGHLIGHTED REGIONS
  6. 6. Navigating EMERGING Markets CUSHMAN & WAKEFIELD 5 Quantifying risk and opportunity across Latin America (LATAM) depends on the country and market of interest. Cities such as Rio de Janeiro, Buenos Aires, and São Paulo have made significant progress over the last decade in improving the quality of their infrastructure, which in turn has attracted significant foreign capital to the real estate sector and put them on the list of top markets for office demand. Parts of these cities remain underserved by utilities and the quality of commercial construction can vary from building to building, even within the same submarket. Outside these markets, the political, infrastructure, and economic risks for corporate occupancy vary dramatically. Below is a ranking of the key LATAM countries covered in this report according to their GDP growth from 2011 to 2012. ECONOMIC GROWTH – LATAM Country Ranking per YOY Change in Real GDP No. Country % Change in GDP 1. PERU 6.3 2. VENEZUELA 5.6 3. CHILE 5.5 4. COLOMBIA 4.0 5. MEXICO 3.9 6. ARGENTINA 1.9 7. BRAZIL 0.9 Source: Oxford Economics, 2012 Property Market Trends While Brazil continues to be one of the most sought-after countries in LATAM, the nation’s recent economic slowdown and political turmoil is expected to negatively impact demand in the commercial office market. New office inventory delivered across Brazil’s major cities in 2013 will exceed 2011 and 2012 levels combined. The major markets of Rio de Janeiro and São Paulo have already seen a pullback in corporate leasing activity and the market is expected to struggle over the next few years to fill the new inventory scheduled to come on-line, which at this point stands at only 30% pre-leased. That being said, these markets are not expected to cede ground as the leaders in LATAM. Peru is experiencing a significant increase in occupier interest. The country ranks as one of the most business friendly global markets. According to The World Bank’s Ease of Doing Business Ranking (EODB), Peru ranks 43 out of 185 and is near the top of C&W’s list in this report (Thailand has the highest EODB ranking with 18/185). The long-term prospects for Peru are positive and the country is expected to achieve GDP growth of 6.5% in 2013, on top of the 6.3% it generated in 2012. Although small, Colombia’s recent strong economic performance has driven occupiers to this market over the last 12 months and C&W puts Colombia second to Peru in its growth prospects for occupiers in LATAM. Overview continued on the following page… LATIN AMERICA The issue most affecting markets in Latin America over the next five years will be the completion of the $5.2 billion Panama Canal project. GLOBAL MAP REGION MAP
  7. 7. Navigating EMERGING Markets CUSHMAN & WAKEFIELD 6 In contrast, Venezuela is one of the most challenging markets globally to conduct business. The World Bank gives it an EODB ranking of 180 out of 185. Despite its vast oil reserves and the recent death of Hugo Chavez, Venezuela is expected to remain challenging for corporate location. The country recently de-valued its currency, which has eroded middle-class income and further decreased the purchasing power of consumers. Below is a ranking of the key LATAM cities in this report according to rental rates. PRIME OFFICE RENT No. City Country Prime Rental Rate Trend 1. RIO DE JANIERO Brazil 65 Stable 2. SÃO PAULO Brazil 61 Stable 3. CARACAS Venezuela 46 Stable 4. BOGOTÁ Colombia 34 Stable 5. BUENOS AIRES Argentina 29 Stable 6. MEXICO CITY Mexico 30 Stable 7. SANTIAGO Chile 26 Stable 8. LIMA Peru 19 Accelerating 9. QUITO Ecuador 15 Accelerating Source: Cushman & Wakefield, Rent quoted as asking rent USD/sq. m/month Perhaps the issue that will most affect LATAM in the next five years will be the expansion of the Panama Canal. While Central American markets did not make C&W’s list this year, due to only marginal interest from corporations for office space, the Panama Canal project will likely change this. The $5.2 billion infrastructure project is scheduled to be completed by 2015 and will allow ships that hold up to 13,000 twenty-foot containers to pass more quickly from east to west and strengthen the already growing trade relationship between LATAM and China. Corporations should take this project and its potential affect on the region into account when assessing location opportunities in LATAM. GLOBAL MAP REGION MAP
  8. 8. Navigating EMERGING Markets CUSHMAN & WAKEFIELD 7 The past five to ten years have seen the emerging markets of Africa and the Middle East (AME) come to the fore in terms of future development and interest. While many of these markets have already seen a wave of multinational corporations establish a presence in recent years, the progression of infrastructure and transparency improvements have further opened up these countries to receiving new business. Occupancy risks within parts of AME are arguably higher than in any other part of the world. A number of countries suffer from high levels of corruption, poor security, inadequate infrastructure and a lack of transparency. While these issues pose important and restrictive barriers to entry, how AME develops over the next five years will be a critical factor in shaping global economic growth. As can be seen from the chart below, a majority of these nations are growing economically, despite their risks. The key for multinationals will be how to harness the opportunities that exist in the region, while simultaneously protecting the business from downside risk. Below is a ranking of the key AME countries covered in this report according to their GDP growth from 2011 to 2012. ECONOMIC GROWTH – AME No. Country % Change in GDP No. Country % Change in GDP 1. COTE D’IVOIRE 8.1 13. ZIMBABWE 4.5 2. ANGOLA 8.0 14. KENYA 4.3 3. ZAMBIA 7.3 15. TUNISIA 4.1 4. DEM REP OF CONGO 7.2 16. SENEGAL 3.4 5. GHANA 7.1 17. BAHRAIN 3.4 6. SAUDI ARABIA 6.8 18. UNITEDARAB EMIRATES 3.3 7 TANZANIA 6.6 19. MOROCCO 2.7 8. NIGERIA 6.5 20. JORDAN 2.7 9. BOTSWANA 6.1 21. ALGERIA 2.5 10 QATAR 6.0 22. SOUTH AFRICA 2.5 11. OMAN 5.5 23. EGYPT 2.2 12. UGANDA 4.5 24. LEBANON 1.0 Source: Oxford Economics, 2012 Overview continued on the following page… The risks of locating in markets across Africa and the Middle East are greater than in any other part of the world. However, the potential business opportunities are equally as great. AFRICA & the MIDDLE EAST GLOBAL MAP REGION MAP
  9. 9. Navigating EMERGING Markets CUSHMAN & WAKEFIELD 8 Property Market Trends There is a discernible difference between the office locations of Africa and the Middle East, with most of the countries in the Middle East and South Africa having relatively transparent markets. The majority of African nations are rapidly developing and markets may consist of only a handful of buildings in some instances, others can suffer from a lack of adequate supply and a lack of responsive ownership. Corporate occupiers are drawn to Africa and the Middle East for a variety of reasons, including mineral wealth, oil, or an expanding middle class. The characteristics of these markets results in situations where Luanda, the capital of Angola, is the most expensive location within the region. The combination of significant demand from the extractive sector, and a lack of suitable quality space has resulted in rents in Angola being some of the highest in the world. Furthermore, markets in Nigeria have continued to expand due to notable domestic demand from a variety of sectors to becoming the more expensive office locations in the region. Below is a ranking of the top ten AME cities in this report according to rental rates. PRIME OFFICE RENT No. City Country Prime Rental Rate Trend 1. LUANDA Angola 120 Stable/Declining 2. LAGOS Nigeria 85 Stable 3. ABUJA Nigeria 65 Stable 4. DOHA Qatar 60 Stable 5. DUBAI UAE 45 Stable/Accelerating 6. ALGIERS Algeria 45 Stable 7. KINSHASA Democratic Republic of Congo 45 Stable 8. ABU DHABI UAE 41 Stable 9. CAIRO Egypt 40 Stable/Declining 10. ACCRA Ghana 40 Stable Source: Cushman & Wakefield, Rent quoted as asking rent USD/sq. m/month GLOBAL MAP REGION MAP
  10. 10. Navigating EMERGING Markets CUSHMAN & WAKEFIELD 9 The Asia Pacific (APAC) economy in 2012 exhibited a divergence in growth rates, revealing a split between the developed and developing economies in the region. While the externally oriented, more developed economies of the Asian Tigers and Japan bore the brunt of the pullback in external demand, APAC’s emerging nations were able to call on domestic drivers to buffer economic growth. While these countries remain susceptible to the global ebb and flow of hot capital, there is little doubt that the diverse APAC region, with countries in various stages of development, holds much of the potential that could drive global economic growth into the next decade. Some of these countries, having only begun emerging from the clutches of crippling political and social instability in this decade, were only able to kickstart their economic reform recently; others, having embarked on such programs earlier, are refining economic policies for further development. Almost all countries will present challenges – including security and political risks, corruption, and archaic land use systems – that are endemic in developing economies. Yet, all offer favorable demographics, rapid urbanization, and growing incomes that are fuelling the need for investments in infrastructure – and where demand for corporate real estate is escalating. Below is a ranking of the key APAC countries covered in this report according to their GDP growth from 2011 to 2012. ECONOMIC GROWTH- APAC No. Country % Change in GDP 1. MONGOLIA 12.3 2. CHINA 7.8 3. THE PHILIPPINES 6.6 4. THAILAND 6.4 5. SRI LANKA 6.4 6. BANGLADESH 6.3 7. CAMBODIA 6.2 8 INDONESIA 6.2 9. MYANMAR 5.9 10. INDIA 5.0 11. VIETNAM 5.0 Source: Oxford Economics, GDP 2012 Overview continued on the following page… While the more developed APAC nations bore the brunt of the pull back in global demand, APAC’s emerging countries were able to call on domestic strengths to support growth. ASIA PACIFIC GLOBAL MAP REGION MAP
  11. 11. Navigating EMERGING Markets CUSHMAN & WAKEFIELD 10 Property Market Trends The principal markets in APAC have seen a slowdown in occupier demand over the last year. While Beijing remains the primary office market in the region (and has been considered a leading global market for over a decade), secondary markets in China such as Chengdu, Nanjing, and others are seeing increased occupier demand. These markets now offer competitive economies and improved infrastructures. In China, many transnational corporations have relocated their back-up functions, regional offices or even headquarters to second-tier cities. Manufacturers such as Honeywell, Daimler, and General Motors have established their offices in Chengdu, Tianjin, Wuhan, etc. and IT service corporations like IBM, Intel, and Microsoft have different functions set up in Nanjing and Dalian. Outside China, the markets garnering the most occupier attention include the Philippines, where demand from the Business Process Outsourcing (BPO) industry in Manila has been a significant driver and Yangon and Jakarta, which have seen rental rates climb to 82USD and 36USD per/sq. m/month. Below is a ranking of the key APAC cities in this report according to rental rates. PRIME OFFICE RENT No. City Country Prime Rental Rate Trend 1. YANGON Myanmar 82 Accelerating 2. ULAAN BAATAR Mongolia 70 Accelerating 3. HO CHI MINH CITY Vietnam 49 Declining 4. HANOI Vietnam 38 Declining 5. JAKARTA Indonesia 36 Accelerating 6. NANJING China 32 Accelerating 7. CHENGDU China 25 Accelerating 8. DHAKA Bangladesh 24 Accelerating 9. MANILA (MAKATI) The Philippines 23 Accelerating 10. BANGKOK Thailand 21 Accelerating 11. COLOMBO Sri Lanka 20 Accelerating 12. PHNOM PENH Cambodia 19 Accelerating 13. MANILA (FORT BONIFACIO) The Philippines 16 Accelerating 14. CHANDIGARH India 9 Slowing 15. KOCHI India 7 Slowing Source: Cushman & Wakefield, Rent quoted as asking rent USD/sq. meter/month GLOBAL MAP REGION MAP
  12. 12. Navigating EMERGING Markets rEGIONAL OVERVIEWS The following are overviews of the key trends for each region identified in this report. There is a map at the end of each region overview—click on each country to receive a detailed description of the criteria best used to determine the suitability of that country for corporate expansion. Africa & Middle East Global Latin America Asia Pacific
  13. 13. Navigating EMERGING Markets CUSHMAN & WAKEFIELD 13 Quantifying risk and opportunity across Latin America (LATAM) depends on the country and market of interest. Cities such as Rio de Janeiro, Buenos Aires, and São Paulo have made significant progress over the last decade in improving the quality of their infrastructure, which in turn has attracted significant foreign capital to the real estate sector and put them on the list of top markets for office demand. Parts of these cities remain underserved by utilities and the quality of commercial construction can vary from building to building, even within the same submarket. Outside these markets, the political, infrastructure, and economic risks for corporate occupancy vary dramatically. Below is a ranking of the key LATAM countries covered in this report according to their GDP growth from 2011 to 2012. ECONOMIC GROWTH – LATAM Country Ranking per YOY Change in Real GDP No. Country % Change in GDP 1. PERU 6.3 2. VENEZUELA 5.6 3. CHILE 5.5 4. COLOMBIA 4.0 5. MEXICO 3.9 6. ARGENTINA 1.9 7. BRAZIL 0.9 Source: Oxford Economics, 2012 Property Market Trends While Brazil continues to be one of the most sought-after countries in LATAM, the nation’s recent economic slowdown and political turmoil is expected to negatively impact demand in the commercial office market. New office inventory delivered across Brazil’s major cities in 2013 will exceed 2011 and 2012 levels combined. The major markets of Rio de Janeiro and São Paulo have already seen a pullback in corporate leasing activity and the market is expected to struggle over the next few years to fill the new inventory scheduled to come on-line, which at this point stands at only 30% pre-leased. That being said, these markets are not expected to cede ground as the leaders in LATAM. Peru is experiencing a significant increase in occupier interest. The country ranks as one of the most business friendly global markets. According to The World Bank’s Ease of Doing Business Ranking (EODB), Peru ranks 43 out of 185 and is near the top of C&W’s list in this report (Thailand has the highest EODB ranking with 18/185). The long-term prospects for Peru are positive and the country is expected to achieve GDP growth of 6.5% in 2013, on top of the 6.3% it generated in 2012. Although small, Colombia’s recent strong economic performance has driven occupiers to this market over the last 12 months and C&W puts Colombia second to Peru in its growth prospects for occupiers in LATAM. Overview continued on the following page… LATIN AMERICA The issue most affecting markets in Latin America over the next five years will be the completion of the $5.2 billion Panama Canal project. GLOBAL MAP REGION MAP
  14. 14. Navigating EMERGING Markets CUSHMAN & WAKEFIELD 14 In contrast, Venezuela is one of the most challenging markets globally to conduct business. The World Bank gives it an EODB ranking of 180 out of 185. Despite its vast oil reserves and the recent death of Hugo Chavez, Venezuela is expected to remain challenging for corporate location. The country recently de-valued its currency, which has eroded middle-class income and further decreased the purchasing power of consumers. Below is a ranking of the key LATAM cities in this report according to rental rates. PRIME OFFICE RENT No. City Country Prime Rental Rate Trend 1. RIO DE JANIERO Brazil 65 Stable 2. SÃO PAULO Brazil 61 Stable 3. CARACAS Venezuela 46 Stable 4. BOGOTÁ Colombia 34 Stable 5. BUENOS AIRES Argentina 29 Stable 6. MEXICO CITY Mexico 30 Stable 7. SANTIAGO Chile 26 Stable 8. LIMA Peru 19 Accelerating 9. QUITO Ecuador 15 Accelerating Source: Cushman & Wakefield, Rent quoted as asking rent USD/sq. m/month Perhaps the issue that will most affect LATAM in the next five years will be the expansion of the Panama Canal. While Central American markets did not make C&W’s list this year, due to only marginal interest from corporations for office space, the Panama Canal project will likely change this. The $5.2 billion infrastructure project is scheduled to be completed by 2015 and will allow ships that hold up to 13,000 twenty-foot containers to pass more quickly from east to west and strengthen the already growing trade relationship between LATAM and China. Corporations should take this project and its potential affect on the region into account when assessing location opportunities in LATAM. GLOBAL MAP REGION MAP
  15. 15. Navigating EMERGING Markets CUSHMAN & WAKEFIELD 15 Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. latin america Mexico Venezuela Colombia Peru Brazil ChilE Argentina Asia Pacific Africa & Middle East Global
  16. 16. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. latin america latin america C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile SUITABILITY OVERVIEW Argentina is the second largest country in Latin America by size. It benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. During 2012, economic growth in Argentina was just under 2%. Prospects for the region economically in 2013 appear brighter due to the high price of grain and the continued strong growth prospects for Brazil. The Argentine government has pursued a strict policy with regards to the exchange rate of its currency, even going so far as to ask for stated use of the dollars that are purchased. Occupiers will find it challenging to conduct business in Argentina and four of the above five risk rankings for the country are in the bottom two quartiles within LATAM. While the country is receiving more than its fair share of foreign investment, its extreme southern location and relatively small population may make other countries more demographically compelling for occupier investment. OFFICE MARKET OVERVIEW Activity across the Argentine office market has been relatively consistent over the last several quarters. Buenos Aires, although considered a global city, is not prone to the cycle swings of other more dynamic markets. Asking rental rates and office vacancy have hovered around $30 USD/sqm/m and 10% since 2010. Many multinationals have reduced their footprint in the region and office vacancy is expected to rise slightly in the coming quarters. Economic Indicators Population, thousands 41,164 GDP, US$ millions 475,066 GDP per capita, US$ 11,540 CPI 10 Population Growth % y/y 0.9 FDI, US$ millions 7,006 GDP real % y/y 1.9 Prime Office Rent Q1 2013 (USD/sq. meter/month) BUENOS AIRES 29 Key Industries Food & agriculture, consumer durables, textiles, chemicals, printing, steel, auto manufacturing Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 124 Dealing with Construction Permits (Out of 185) 171 Registering Property (Out of 185) 135 Corruption Perceptions Ranking (Out of 174) 102 Political Stability and Absence ofViolence (100 = Most Stable) 53.77 Source:World Bank & Transparency International (2012) ARGENTINA Bottom QuartileThird QuartileTop Quartile C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Second Quartile GLOBAL MAP REGION MAP
  17. 17. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. latin america latin america Economic Indicators Population, thousands 198,599 GDP, US$ millions 2,255,038 GDP per capita, US$ 11,355 CPI 5.4 Population Growth % y/y 0.9 FDI, US$ millions 68.1 GDP real % y/y 0.9 Prime Office Rent Q1 2013 (USD/sq. meter/month) RIO DE JANEIRO SÃO PAULO 65 61 Key Industries Power, mining, industrial production, banking, consumer goods, oil & gas Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 130 Dealing with Construction Permits (Out of 185) 131 Registering Property (Out of 185) 109 Corruption Perceptions Ranking (Out of 174) 69 Political Stability and Absence ofViolence (100 = Most Stable) 46.23 Source:World Bank & Transparency International (2012) SUITABILITY OVERVIEW Although still considered an emerging market, Brazil boasts one of the world’s leading economies by nominal GDP and is the largest by far in Latin America. According to the World Economic Forum, Brazil was the top country in upward evolution of competitiveness in 2009, overcoming Russia for the first time and closing the competitiveness gap with India and China. Together with Mexico, Brazil has been the leader in Latin America in terms of multinational presence. While the country has long attracted the attention of international banks, Brazil now possesses the second largest industrial sector in the Americas, is making inroads in pharmaceuticals and life sciences, and has a strong housing sector. Home grown companies are also doing well. Petrobas, an oil & gas refiner, is ranked number four in the world on the Forbes Global 4000, with 2011 total revenue of $138.0 billion. Despite the improvements to its infrastructure and the significant capital that continues to pour into the country, many parts of Brazil are still underdeveloped. Even in the major centers of Rio de Janeiro and São Paulo, neighborhoods can vary widely from one street to the next. OFFICE MARKET OVERVIEW The sheer volume of new construction activity across Brazil far exceeds the new construction levels being posted by any other market in Latin America. Brazil closed the first quarter with the delivery of new inventory totalling 219,000 sq. meter, up almost 30% over the same period in 2012. For the balance of the year, inventory delivered in the major cities of São Paulo, Rio de Janeiro, Curitiba, Brasilia, Salvador, Porto Alegre, Recife and Vitoria will exceed 1.3 million sq. meter, an increase of 62% over 2012 levels. Occupier demand is expected to keep pace with the level of new construction, as there continues to be strong interest from multinationals seeking to locate in Brazil and there is a shortage of modern and corporate compatible inventory. Rental rates across class A markets in Brazil are up year over year. However, the rate of increase does appear to be slowing, as quarter-over-quarter prime CBD rent is up only 0.3%. That being said, a slowdown in leasing or lower costs for occupiers are not in anyone’s forecast for the near future. São Paulo boasts one of the highest rents in the global market, with prime office space leasing for close to 61USD per/sq. meter/month. Brazil is home to a significant number of high-growth oriented companies and according to IBGE, these companies are employing close to 20,000 more people each year. BRAZIL C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile GLOBAL MAP REGION MAP
  18. 18. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. latin america latin america SUITABILITY OVERVIEW Chile is one of the most stable marketd in LATAM, and one of the most effectively managed countries in the Americas. Chile has the highest per capita GDP of any country in LATAM and presents one of the lowest risk opportunities for corporate expansion. Chilean consumers continue to be optimistic abut the country’s prospects, despite what might be going on in other parts of LATAM. The country is expected to see strong private consumption growth and robust gains in consumer and retail sales in 2013. The country’s unemployment rate at the beginning of 2012 was 6.1%, the lowest it has been since December 2006. The most critical factor weighing on economic growth for Chile will be the extent of the slowdown in China and its effect on Chilean exports. Should Chinese growth in 2013 be stronger than anticipated, the Chilean exports economy will perform more strongly. Chile has one of the lowest inflations rates in LATAM boosted by the current favorable exchange rates with the peso. OFFICE MARKET OVERVIEW The Santiago office market is one of the smallest in LATAM. While extremely stable, the market witnesses only a handful of transactions in a given quarter. Rentals rates have remained flat over the last 12-24 months and the ownership in the market is held by REITS and pension funds, looking for stable and uneven annual returns. Despite the country’s impressive financial performance, Santiago has not seen widespread occupier interest. Demographically, Chile is one of the slowest growing countries in LATAM and multinationals seeking to capitalize on strong and increasing consumer demand are currently looking to other markets for expansion opportunities. C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile Economic Indicators Population, thousands 17,443 GDP, US$ millions 268,298 GDP per capita, US$ 15,381 CPI 3.0 Population Growth % y/y 0.9 FDI, US$ millions 9,233 GDP real % y/y 5.5 Prime Office Rent Q1 2013 (USD/sq. meter/month) SANTIAGO 26 Key Industries Mining & materials, wood, wine, fish, textiles Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 37 Dealing with Construction Permits (Out of 185) 84 Registering Property (Out of 185) 55 Corruption Perceptions Ranking (Out of 174) 20 Political Stability and Absence ofViolence (100 = Most Stable) 65.1 Source:World Bank & Transparency International (2012) CHILE GLOBAL MAP REGION MAP
  19. 19. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. latin america latin america SUITABILITY OVERVIEW Colombia recorded GDP growth of 4.0% in 2012, boosted by its growing service sector base. Forecasts for 2013 indicate that growth could reach as high as 4.8-5.0%. Much like Peru, the government of Colombia has taken measures to control spending, boost private consumption, and encourage competition. Although reductions in government spending have been unpopular with some industries, the economic result has been largely positive. Corporations will find the business climate friendly in Colombia, particularly for US-based corporations, and the barriers to entry lower than Brazil. In February, thousands of workers in the coffee industry went on strike in Bogota, citing the need for further government subsidy and support in the wake of falling global commodity prices. While lower commodity prices have devalued to Colombian Peso, this is expected to lead to an uptick in exports and boost the country’s competitiveness. OFFICE MARKET OVERVIEW Rental rates in Bogota are up 2.0% year-over-year, despite a near 50% increase in the overall supply to the market. Over the last two years, net new absorption has outpaced new supply to the market; however, this trend does appear to be ending. While the Colombian economy will continue to perform well, rental rates are are expected to stabilize as occupiers have reached a critical juncture where they are weighing the price of occupancy and the necessity of being in the market. Given the slowdown and political unrest in Brazil, and the lack of alternative space, it is expected that occupiers will continue to show strong interest in Colombia. Economic Indicators Population, thousands 47,524 GDP, US$ millions 369,798 GDP per capita, US$ 7,781 CPI 3.2 Population Growth % y/y 1.3 FDI, US$ millions 5,655 GDP real % y/y 4.0 Prime Office Rent Q1 2013 (USD/sq. meter/month) BOGOTA 34 Key Industries Coffee, coal, petroleum, agriculture Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 45 Dealing with Construction Permits (Out of 185) 27 Registering Property (Out of 185) 52 Corruption Perceptions Ranking (Out of 174) 94 Political Stability and Absence ofViolence (100 = Most Stable) 12.26 Source:World Bank & Transparency International (2012) C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile COLOMBIA GLOBAL MAP REGION MAP
  20. 20. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. latin america latin america C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile SUITABILITY OVERVIEW Mexico benefits from being the closest emerging economy to the United States and it has made great strides over the last five years to become a more open and transparent country. Indeed, The World Bank gives Mexico an EODB ranking of 48 out of 185, placing it in the top quartile for the Americas region. The election of President Enrique Pena Nieto has given hope to a potential decreases in crime and corruption, as well as a more disciplined government with respect to trade and finance. Drug trafficking is a significant barrier to economic growth in Mexico. According to Business Monitor International (BMI), Mexico’s continued “crime and drug problem pose the biggest obstacle to growing the economy”. Drug cartels continue to escalate violence, even in previously peaceful areas. This has bolstered the opinion that Mexico is an insecure nation. Despite this issue, a reform agenda is underway and corporations continue to show interest in tapping into the nation’s key strengths—its manufacturing expertise, natural resources, and various production capabilities. At the end of the first quarter of 2013, unemployment in Mexico stood at 5.8%, 50 basis points below the same period one year earlier. GDP growth, although moderating due to a slowdown in global manufacturing, is still expected to be above 3% by the end of the year. OFFICE MARKET OVERVIEW Property market dynamics are improving in Mexico’s main market of Mexico City. Leasing activity in the first quarter increased almost 15% from the comparable period in 2012, with the central business district witnessing the bulk of demand. Total leases signed in the first quarter of 125,787 sq. meter represent the largest first quarter leasing number posted since 2008. Active occupiers in the market include electronic and manufacturing distributor Samsung Electronics, international law firm Jones Day, India-based technology and business consulting firm Infosys, and Boston Consulting Group. Outside of Mexico City, automotive lighting and electronics manufacturer HELLA has started construction on a new 100 million USD facility in Guanajuato, providing an optimistic outlook for supply manufacturing. Economic Indicators Population, thousands 116,304 GDP, US$ millions 1,177,489 GDP per capita, US$ 10,124 CPI 4.1 Population Growth % y/y 1.2 FDI, US$ millions 971.4 GDP real % y/y 3.9 Prime Office Rent Q1 2013 (USD/sq. meter/month) MEXICO CITY 19.70 Key Industries Oil & gas, manufacturing, production, distribution Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 48 Dealing with Construction Permits (Out of 185) 36 Registering Property (Out of 185) 141 Corruption Perceptions Ranking (Out of 174) 105 Political Stability and Absence ofViolence (100 = Most Stable) 25.47 Source:World Bank & Transparency International (2012) MEXICO Bottom QuartileThird QuartileSecond QuartileTop Quartile C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: GLOBAL MAP REGION MAP
  21. 21. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. latin america latin america C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile SUITABILITY OVERVIEW Peru has rapidly made it to the top of the list for occupiers looking to expand in South America. The country’s business friendly government has opened-up trade and supported foreign and domestic corporate expansion. The Peruvian economy is expected to grow by 6.5% in 2013 on the back of the countries strengths in mining, services, construction and trade. This is up from 6.3% growth in GDP recorded in 2012. Peru’s government has inceased trade with North America (i.e., the United States and Canada), and the economy has benefitted from decreased exposure to the prolonged economic malaise in EMEA. Although small, the country has strengthening demographics, willingness to be transparent and recent strong economic performance has made Peru and force in the LATAM economy. OFFICE MARKET OVERVIEW Peru’s main office market is the country’s capital, Lima. The first quarter of 2013 saw Lima introduce new supply in its central business district. The recent unrest in Brazil has benefitted the occupier market in Peru. As companies reassess their commitment to São Paulo and Buenos Aires, they are looking to Peru’s governmentr. Asking rents in Lima hover around the $19 per sq.meter/month, up almost 3% year-over-year. Rent growth is expected to continue over the next twelve months, even as the market introduces new supply. In 2012, Lima saw 109,000 sq. meter of new supply hit the market, the most in the last six years. The primary submarket is San Isidro, which has seen the bulk of occupier demand and absorption. Economic Indicators Population, thousands 29,750 GDP, US$ millions 199,533 GDP per capita, US$ 6,707 CPI 3.7 Population Growth % y/y 1.1 FDI, US$ millions 12,027 GDP real % y/y 6.3 Prime Office Rent Q1 2013 (USD/sq. meter/month) LIMA 19 Key Industries Services, manufacturing, extraction Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 43 Dealing with Construction Permits (Out of 185) 86 Registering Property (Out of 185) 19 Corruption Perceptions Ranking (Out of 174) 83 Political Stability and Absence ofViolence (100 = Most Stable) 25.94 Source:World Bank & Transparency International (2012) PERU GLOBAL MAP REGION MAP
  22. 22. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. latin america latin america SUITABILITY OVERVIEW Venezuela is one of the more difficult countries to in which to conduct business in LATAM. Long ruled by President Hugo Chavez, who died in March 2013, Venezuela has pursued strong government interventionist policies and it is widely believed that the new government under a President Maduro will continue to follow Chavez’s social spending agenda. In February of this year the government devalued the Bolivar by adjusting the official exchange rate of the currency. Government intervention in all aspects of fiscal, monetary and business spending is only expected to increase. In late February, the government issued a 72-hour closure notice for Spanish-based retailer Zara, citing the company’s increase in retail prices as the reason for closure. Occupiers will find it extremely challenging to operate in this type of environment. Venezuela holds a World Bank Ease of Doing business ranking of 180 out of 185, making it one of the most difficult nations globally for foreign expansion and foreign operated businesses. The country also ranks 165 out of 174 for corruption. Currently, inflation is running in the low 20% range, which significantly cramps consumer spending, making it even less compelling from an investment and occupancy perspective. All this being said, Venezuela has some of the largest oil reserves in the world and offers significant opportunity for multinationals the oil, energy metals and mining. OFFICE MARKET OVERVIEW Caracas is the main office market in Venezuela and it is mostly dependant on foreign occupiers in the oil and gas industry. There is little new office construction in Caracas and the available inventory for occupiers seeking space in the market is thin. Prime rental rates can range from a low of 44-50USD per sq. meter/month/year to as high as 87USD per sq. meter/year. C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile Economic Indicators Population, thousands 29,891 GDP, US$ millions 381,473 GDP per capita, US$ 12,759 CPI 21.1 Population Growth % y/y 1.5 FDI, US$ millions 3,200 GDP real % y/y 5.6 Prime Office Rent Q1 2013 (USD/sq. meter/month) Caracas 46 Key Industries Oil, steel, aluminium, cement, manufacturing Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 180 Dealing with Construction Permits (Out of 185) 109 Registering Property (Out of 185) 90 Corruption Perceptions Ranking (Out of 174) 165 Political Stability and Absence ofViolence (100 = Most Stable) 10.4 Source:World Bank & Transparency International (2012) VenezuEla GLOBAL MAP REGION MAP
  23. 23. Navigating EMERGING Markets CUSHMAN & WAKEFIELD 23 The past five to ten years have seen the emerging markets of Africa and the Middle East (AME) come to the fore in terms of future development and interest. While many of these markets have already seen a wave of multinational corporations establish a presence in recent years, the progression of infrastructure and transparency improvements have further opened up these countries to receiving new business. Occupancy risks within parts of AME are arguably higher than in any other part of the world. A number of countries suffer from high levels of corruption, poor security, inadequate infrastructure and a lack of transparency. While these issues pose important and restrictive barriers to entry, how AME develops over the next five years will be a critical factor in shaping global economic growth. As can be seen from the chart below, a majority of these nations are growing economically, despite their risks. The key for multinationals will be how to harness the opportunities that exist in the region, while simultaneously protecting the business from downside risk. Below is a ranking of the key AME countries covered in this report according to their GDP growth from 2011 to 2012. ECONOMIC GROWTH – AME No. Country % Change in GDP No. Country % Change in GDP 1. COTE D’IVOIRE 8.1 13. ZIMBABWE 4.5 2. ANGOLA 8.0 14. KENYA 4.3 3. ZAMBIA 7.3 15. TUNISIA 4.1 4. DEM REP OF CONGO 7.2 16. SENEGAL 3.4 5. GHANA 7.1 17. BAHRAIN 3.4 6. SAUDI ARABIA 6.8 18. UNITEDARAB EMIRATES 3.3 7 TANZANIA 6.6 19. MOROCCO 2.7 8. NIGERIA 6.5 20. JORDAN 2.7 9. BOTSWANA 6.1 21. ALGERIA 2.5 10 QATAR 6.0 22. SOUTH AFRICA 2.5 11. OMAN 5.5 23. EGYPT 2.2 12. UGANDA 4.5 24. LEBANON 1.0 Source: Oxford Economics, 2012 Overview continued on the following page… The risks of locating in markets across Africa and the Middle East are greater than in any other part of the world. However, the potential business opportunities are equally as great. AFRICA & the MIDDLE EAST GLOBAL MAP REGION MAP
  24. 24. Navigating EMERGING Markets CUSHMAN & WAKEFIELD 24 Property Market Trends There is a discernible difference between the office locations of Africa and the Middle East, with most of the countries in the Middle East and South Africa having relatively transparent markets. The majority of African nations are rapidly developing and markets may consist of only a handful of buildings in some instances, others can suffer from a lack of adequate supply and a lack of responsive ownership. Corporate occupiers are drawn to Africa and the Middle East for a variety of reasons, including mineral wealth, oil, or an expanding middle class. The characteristics of these markets results in situations where Luanda, the capital of Angola, is the most expensive location within the region. The combination of significant demand from the extractive sector, and a lack of suitable quality space has resulted in rents in Angola being some of the highest in the world. Furthermore, markets in Nigeria have continued to expand due to notable domestic demand from a variety of sectors to becoming the more expensive office locations in the region. Below is a ranking of the top ten AME cities in this report according to rental rates. PRIME OFFICE RENT No. City Country Prime Rental Rate Trend 1. LUANDA Angola 120 Stable/Declining 2. LAGOS Nigeria 85 Stable 3. ABUJA Nigeria 65 Stable 4. DOHA Qatar 60 Stable 5. DUBAI UAE 45 Stable/Accelerating 6. ALGIERS Algeria 45 Stable 7. KINSHASA Democratic Republic of Congo 45 Stable 8. ABU DHABI UAE 41 Stable 9. CAIRO Egypt 40 Stable/Declining 10. ACCRA Ghana 40 Stable Source: Cushman & Wakefield, Rent quoted as asking rent USD/sq. m/month GLOBAL MAP REGION MAP
  25. 25. Navigating EMERGING Markets CUSHMAN & WAKEFIELD 25 Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. AFRICA & the MIDDLE EAST Morocco Algeria Tunisia Libya Egypt Lebanon Saudi Arabia Oman Jordan United Arab Emirates Qatar Bahrain Senegal CÔTE D’IVOIRE Ghana Nigeria DR Congo Kenya Uganda Tanzania Zambia Zimbabwe Botswana Angola South Africa Latin America Asia Pacific Global
  26. 26. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. africa & the middle east GLOBAL MAP REGION MAP SUITABILITY OVERVIEW Algeria has historically maintained a strong reliance on hydrocarbon and oil exports, although the government has taken steps to diversify the economy as a way to boost foreign direct investment. Additionally, a few large-scale infrastructure projects are now underway in hopes to stimulate international investment interest even further, with projects including the construction of new roads and railway improvement. Algeria’s GDP growth has been positive over the past few years, with 2011 seeing a growth rate of 2.6%. This was largely driven by the construction and public sectors as well as increased internal demand. However, recently Algeria has struggled to stimulate economic expansion, as the slowdown within Europe as well as the protests of early 2011 have both hampered financial services and delayed any planned infrastructure development. That said, going forward, the anticipated high price of oil should help to sustain further economic growth in the medium- to long term. Furthermore, the next few years will see an intensification of political, economic and social reform in response to pressing social demand, with changes intended to both strengthen the democratic process and improve living conditions. OFFICE MARKET OVERVIEW The primary office submarkets within Algiers are Hydra, Pins Maritime, and Bab Ezzouar, with the former reaching the southern areas of the city centre and the latter two markets located close to the main international airport. In particular, Bab Ezzour’s high-quality infrastructure and building availability as well as its proximity to the airport have seen its prominence as a business centre emerge, while Pins Maritime is home to the newly completed Algeria Business Centre. However, as a whole the market suffers from an oversupply, exacerbated by several developments with large floorplates that are in progress or near completion. Indeed, with this large amount of new construction – particularly in the Hydra and Pins Maritime submarkets – rental levels have eased under the pressure of high availability. Consequently, future market demand is less likely to drive from new entrants to the market but more from consolidations from existing companies into better-quality space. Traffic congestion also remains a concern within Algiers’s city centre, which has seen prime or high-quality developments targeted in the more suburban areas of the city. Economic Indicators Population, thousands 36,462 GDP, US$ millions 185,858 GDP per capita, US$ 5,097 CPI 8.9 Population Growth % y/y 1.4 FDI, US$ millions 2,869 GDP real % y/y 2.5 Prime Office Rent Q1 2013 (USD/sq. meter/year) ALGIERS (Asking Rent) 540 Key Industries Petroleum, natural gas, light industries, mining, food processing Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 152 Dealing with Construction Permits (Out of 185) 138 Registering Property (Out of 185) 172 Corruption Perceptions Ranking (Out of 174) 105 Political Stability and Absence ofViolence (100 = Most Stable) 9.43 Source:World Bank & Transparency International (2012) C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile THE PEOPLES DEMOCRATIC REPUBLIC OF ALGERIA GLOBAL MAP REGION MAP
  27. 27. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. africa & the middle east SUITABILITY OVERVIEW Angola’s economy is heavily dependent on the oil industry. As a member of OPEC since 2006, this sector accounts for over half of the country’s GDP. Furthermore, Angola has sustained multiple years of positive GDP growth since 2010, bolstered primarily by rising oil prices as well as strong expansion in non-oil related industries. Angola’s oil production is expected to continue unabated amidst climbing oil prices, and consequently Angola’s economy is expected to go from strength to strength. Another important component of Angola’s economy is the diamond industry: the country remains one of the largest producers of rough diamonds in the world. Much like the oil industry, diamond and other commodity production is expected to see prices continue to rise for the foreseeable future, which not only will fuel Angola’s economic development but will ensure the extractive industries remain the largest constituents of the local economy. That said, like many other African nations, concerns over corruption and inadequate legislation prevent increased investment activity within Angola, and these issues are expected to remain pertinent barriers to greater investment interest in the long term. OFFICE MARKET OVERVIEW Angola’s major economic centre and thus primary office market is within Luanda, with the Marginal and developing Luanda Sul submarkets serving as the prime office areas of the city. Angola is well known for its high-profile oil and diamond industries, which have bolstered an increasing number of international businesses establishing a presence within Luanda, particularly from the banking and energy sectors. Recent years saw Luanda characterised by a lack of high-quality supply amidst robust demand, particularly from prominent extractive companies, which drove rents to significant levels. This made Angola not only the most expensive office market in Africa but a contender to some of the most expensive global office locations. However, this year has seen early signs of waning growth, a consequence of the substantial office and infrastructure development that followed the demand boom. It is now anticipated that rental expansion will begin to abate by the second half of 2013. In terms of supply levels, office stock in Luanda is estimated to be around 850,000 sq. meter with the majority of space concentrated in the city centre. Vacancy is expected to exceed 8% as the year progresses. Economic Indicators Population, thousands 20,196 GDP, US$ millions 119,660 GDP per capita, US$ 5,928 CPI 10.3 Population Growth % y/y 2.8 FDI, US$ millions N/A GDP real % y/y 8.0 Prime Office Rent Q1 2013 (USD/sq. meter/year) LUANDA (Asking Rent) 1,440 Key Industries Petroleum and oil, diamonds, iron ore, uranium, gold, cements Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 172 Dealing with Construction Permits (Out of 185) 124 Registering Property (Out of 185) 131 Corruption Perceptions Ranking (Out of 174) 157 Political Stability and Absence ofViolence (100 = Most Stable) 35.85 Source:World Bank & Transparency International (2012) C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile THE REPUBLIC OF ANGOLA GLOBAL MAP REGION MAP
  28. 28. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. africa & the middle east SUITABILITY OVERVIEW The perceived political unrest in Bahrain over the last few years has caused apprehension in relation to international firms from relocating to the Island. At the current time, Dhaka has benefited from this perception, as companies that are looking to establish a Middle East presence are choosing the Emirates over Bahrain. The economy is based primarily around the oil & gas sector and it remains the principal constituent of GDP growth with companies such as Bapco and Tatweer prominent. The well regulated banking sector continues to underline the Kingdom’s commitment to ensuring Bahrain remains a business friendly location, and also supports diversification of the domestic economy. Consequently, some of the more prominent multinational occupiers are from the banking and financial services sector, such as BNP Paribas, KPMG, and Ernst & Young. An ongoing concern and a factor in the shift in demand from the Diplomatic Area to the Al Seef District is in part due to the congestion and lack of parking in the old CBD. Therefore, one of the key long term infrastructure aims will be to try to alleviate the congestion within Manama and improve the attractiveness of the old CBD. OFFICE MARKET OVERVIEW Within the capital Manama, the last three years have seen a shift in demand away from the Diplomatic Area, the historical commercial and financial district on the Island, toward the Al Seef District, which is establishing itself as the premier commercial hub. Since the beginning of 2009, the market has been characterised by an oversupply of space. During this time, demand has fallen due to the continued global financial downturn and perceived political unrest within the Kingdom of Bahrain. This has resulted in four years of successive falls in rental rates. However, it is felt that rental rates have now bottomed out although they are expected to remain stable through to the end of 2013. The outlook for 2013 remains more positive than previous years, although continued high rates of supply will mean that rental rates are unlikely to rise. The majority of demand will be from smaller firms looking for fitted out office space in high profile, easily accessible areas, with ample parking. Many of these smaller firms represent an rise in internal movement for established companies, as opposed to new firms entering the Bahraini market. Larger requirements will predominantly be coming from government entities, as was the case in previous years. Additionally, large, international firms who signed lease agreements in the landmark buildings at the height of the market, now have their leases coming to an end and they are looking to relocate to the much sought after Seef District, which offers much more competitive rates. Economic Indicators Population, thousands 1,393 GDP, US$ millions 31,761 GDP per capita, US$ 22,792 CPI 2.8 Population Growth % y/y 2.2 FDI, US$ millions 913 GDP real % y/y 3.4 Prime Office Rent Q1 2013 (BHD/sq. meter/month) MANAMA – FINANCIAL HARBOUR (Asking rent) 8 Key Industries Banking, oil and gas, aluminium smelting, shipping Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 42 Dealing with Construction Permits (Out of 185) 7 Registering Property (Out of 185) 29 Corruption Perceptions Ranking (Out of 174) 53 Political Stability and Absence ofViolence (100 = Most Stable) 26.42 Source:World Bank & Transparency International (2012) C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile THE KINGDOM OF BAHRAIN GLOBAL MAP REGION MAP
  29. 29. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. africa & the middle east SUITABILITY OVERVIEW The mining and agriculture industries are the main constituents of Botswana’s economy, where mining – particularly of diamonds and, to a lesser extent, copper – comprises the majority of resource-based income. On the other hand, the agricultural sector provides the greatest employment for the country. Botswana stands as one of the most economically viable markets within Africa and is firmly established as a middle-income country. The country has seen steady economic expansion over the past few years, with growth rates forecast to steadily rise in 2012 and 2013. Going forward, Botswana’s economy is anticipated to see further positive growth, supported by the mining sector. Further, enhanced growth may come from the potential opportunity to develop the copper and uranium extractive industries. Botswana’s inflation rate at December 2011 stood at a high 9.2%, a figure well above the target range set by the Bank of Botswana. Nevertheless, the rate came down in 2012 and is expected to see further easing in 2013, largely as a result of subdued demand and thus output in the mining industry as well as reduced public expenditure. OFFICE MARKET OVERVIEW Botswana’s primary office markets are the capital Gaborone and, to a lesser extent, Francistown. In Gaborone, significant developments are underway that are anticipated, once completed, to change the face of the city’s office market. The delivery of multiple large-scale projects – such as the Fairscape Precinct – is expected to see the creation of a new CBD area in the heart of the city and significantly expand the availability of high-quality office supply to unprecedented amounts. With this wide choice of modern, centrally located office buildings, occupier demand is anticipated to come under increasing pressure. This is exacerbated further by the large amount of speculative development included in this great wealth of construction activity. As a result, rental growth in Gaborone is expected to wane as more space is delivered onto market. This comes at a time when governmental and other public sector occupiers – the current drivers of occupier demand – have been forced to freeze requirements in light of austerity measures. Furthermore, this rapid increase in high-quality space could instigate a two tier market, with secondary space struggling to attract occupier interest. Economic Indicators Population, thousands 2,050 GDP, US$ millions 17,840 GDP per capita, US$ 8,702 CPI 7.5 Population Growth % y/y 1.1 FDI, US$ millions 314 GDP real % y/y 6.1 Prime Office Rent Q1 2013 (USD/sq. meter/year) GABORONE (Asking Rent) 198 Key Industries Diamond mining, minerals, agriculture, livestock, tourism, textiles Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 59 Dealing with Construction Permits (Out of 185) 132 Registering Property (Out of 185) 51 Corruption Perceptions Ranking (Out of 174) 30 Political Stability and Absence ofViolence (100 = Most Stable) 84.91 Source:World Bank & Transparency International (2012) C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile THE REPUBLIC OF BOTSWANA GLOBAL MAP REGION MAP
  30. 30. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. africa & the middle east SUITABILITY OVERVIEW The Côte D’Ivoire saw an end to its civil war in 2011, which left a fragile political environment following the election of a coalition government. However, stability has ever since been slowly recovering, and consequently the economy saw a slight improvement in 2012. Indeed, last year saw a 8.1% rise in GDP, albeit this rate was coming from a low base in 2011. The economy remains dominated by the agricultural sector – most notably cocoa production, which continues to employ a large percentage of the workforce within Côte D’Ivoire. However, oil and cocoa production remain the key constituents of the economy in terms of export revenues, with oil extraction expected to rise over the next few years. That said, the number of multinational occupiers remains low, largely a result of the civil war in 2011, with the majority of businesses based in the principal commercial centre, Abidjan. Although political tensions are easing, many companies are awaiting prolonged stability before looking to expand or resume operations within the Côte D’Ivoire. The outlook for the economy will depend largely on an extended period of political stability that will increase business confidence both domestically and in terms of international investment. With agriculture accounting for the majority of activity within the labour market, it is clear that the economy needs to diversify. It is hoped that oil production may create the important stimulus to enable this change over the next few years. OFFICE MARKET OVERVIEW Although the capital city in Côte D’Ivoire is Yamoussoukro, the principal business and commercial centre of Côte D’Ivoire is the port city of Abidjan. The Plateau area of the city is the key location for most multinational occupiers as well as for many embassies and consulates that have remained in Abidjan. However, a number of occupiers are looking for space in quieter, less congested parts of the city, which are both major concerns within the Plateau submarket. As a result, the Cocody and Zone 4 parts of the city have gained momentum as alternative business locations, with a number of occupiers choosing to relocate to these areas. That said, overall demand levels are low, especially from multinational occupiers – a consequence of the ongoing political uncertainty within Côte D’Ivoire. Indeed, as many international tenants have been deterred from operating within Abidjan market: domestic companies are the most active within the market. This has had a stalling effect on the office development pipeline, which was already relatively limited before the conflict in 2011. Nevertheless, a few of the infrastructure and administrative buildings in the large scale Prevoyance scheme have reached completion, which has added a good deal of Grade A space onto market. Economic Indicators Population, thousands 20,648 GDP, US$ millions 23,151 GDP per capita, US$ 1,121 CPI 2.1 Population Growth % y/y 2.3 FDI, US$ millions 424 GDP real % y/y 8.1 Prime Office Rent Q1 2013 (USD/sq. meter/year) ABIDJAN (Asking Rent) 264 Key Industries Agriculture, food stuffs, oil refining, wood products, textiles Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 177 Dealing with Construction Permits (Out of 185) 169 Registering Property (Out of 185) 159 Corruption Perceptions Ranking (Out of 174) 130 Political Stability and Absence ofViolence (100 = Most Stable) 8.49 Source:World Bank & Transparency International (2012) C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile THE REPUBLIC OF CÔTE D’IVOIRE GLOBAL MAP REGION MAP
  31. 31. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. africa & the middle east SUITABILITY OVERVIEW The Democratic Republic of the Congo (DRC) is recovering slowly from many years of social, economic and industrial upheaval. Although it is a particularly rich country in terms of potential mineral wealth, it is also one of the poorest countries on the continent. DRC is also considered one of the most difficult locations in which to undertake business. Consequently, the presence of multinational occupiers is fairly low for a country of its size. However, there are a number of foreign mining companies active within the DRC, including Xstrata plc and Banro Resources Corporation. Indeed, the vast majority of export income originates from the mining industry, and despite a 7.2% rise in GDP in 2012, the economy remains highly reliant on the fluctuations of global commodity prices. These revenues from mining have helped to try and bring improvements to infrastructure quality and economic growth, but ongoing political uncertainty has delayed or postponed a number of these crucial schemes. For example, the DRC faces a major challenge in considerations such as youth employment. More than 70% of those aged 15 to 24 have no jobs, with urban areas particularly affected. OFFICE MARKET OVERVIEW The principal office market within the DRC is the capital city and commercial centre, Kinshasa. The CBD in Kinshasa is located in the Gombe part of the city, with the key office submarket found along the Boulevard du 30 Juin. However, other parts of the city have begun to witness increasing occupier demand on the back of a limited availability of modern space and poor infrastructure quality within the traditional CBD. Furthermore, although modern and high quality space within the city is scarce, this is not an issue for demand levels, which are considerably low due to the lack of multinational occupiers active within the market. Indeed, demand is primarily propelled by domestic occupiers. Any demand is largely derived from the developing telecommunications, oil and mining sectors, and these industries are anticipated to continue driving tenant interest over the next year or so. Although demand is weak, the lack of high quality supply has helped to sustain higher rental levels. Concerning development, there are a number of new city centre projects currently under construction, including Gare Centrale by Rakeen Congo. This scheme will be a mixed-use development comprising offices and apartments in two twin towers as well as incorporating retail space and underground parking. Economic Indicators Population, thousands 69,655 GDP, US$ millions 19,098 GDP per capita, US$ 274 CPI 10.9 Population Growth % y/y 2.7 FDI, US$ millions N/A GDP real % y/y 7.2 Prime Office Rent Q1 2013 (USD/sq. meter/year) KINSHASA (Asking Rent) 540 Key Industries Mining, oil refining, mineral processing, agriculture, cement, textiles Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 181 Dealing with Construction Permits (Out of 185) 81 Registering Property (Out of 185) 106 Corruption Perceptions Ranking (Out of 174) 144 Political Stability and Absence ofViolence (100 = Most Stable) 2.36 Source:World Bank & Transparency International (2012) C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile THE DEMOCRATIC REPUBLIC OF THE CONGO GLOBAL MAP REGION MAP
  32. 32. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. africa & the middle east SUITABILITY OVERVIEW Egypt has suffered from ongoing political uncertainty over the past few years, and this has had a halting effect on the Egyptian economy. Indeed, GDP growth has eased and foreign direct investment (FDI) levels are noticeably reduced as both occupiers and investors alike remain cautious to enter the fragile Egyptian market. The outlook for the economy is also negative, stemming from the election due towards the end of this year as well as the lack of conclusion reached with the IMF regarding an important loan agreement, both of which are anticipated to hamper economic growth. This loan is particularly crucial for Egypt as, when finalised, it is expected to boost the domestic economy and help to attract further assistance. Furthermore, one of the largest and most important constituents of the economy, tourism, has witnessed declining visitor numbers of the past year or so. Consequently, important revenues and employment from this sector have been negatively affected. That said, there remain a number of multinational occupiers within Cairo, primarily in the manufacturing sector (transport and textiles) which is still the most prominent within Egypt. OFFICE MARKET OVERVIEW Cairo is by far the largest city in Egypt and is the key location for business generation and operations. In addition, as the capital city, virtually all government functions and administration are undertaken here. As a result of the ongoing political protests in the centre of Cairo, the trend of most occupiers to look toward the more peripheral areas of the city has continued into this year. Within central Cairo, the main office markets are mostly located within Downtown Cairo, where the Nile City development provides a significant proportion of space within the submarket. However, it is locations such as New Cairo, 6th October City, and Pyramid Heights in particular that continue to attract occupier attention. These areas can offer a higher quality of space than the majority of buildings within Downtown Cairo and also enhanced security. Despite the political protests over the past few years, demand has largely held up, although rents in the peripheral areas of the city remain higher than those in the city centre. However – and also as a result of the recent unrest in the city centre – rental levels have fluctuated from 2010 onwards but have settled at around 40USD/sq. meter/month. Economic Indicators Population, thousands 83,944 GDP, US$ millions 254,505 GDP per capita, US$ 3,031 CPI 7.1 Population Growth % y/y 1.7 FDI, US$ millions 67.3 GDP real % y/y 2.2 Prime Office Rent Q1 2013 (USD/sq. meter/year) CAIRO (Asking Rent) 480 Key Industries Textiles, agriculture, tourism, chemicals, pharmaceuticals, manufacturing, construction, cement, metals Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 109 Dealing with Construction Permits (Out of 185) 165 Registering Property (Out of 185) 95 Corruption Perceptions Ranking (Out of 174) 118 Political Stability and Absence ofViolence (100 = Most Stable) 11.79 Source:World Bank & Transparency International (2012) C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile THE ARAB REPUBLIC OF EGYPT GLOBAL MAP REGION MAP
  33. 33. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. africa & the middle east SUITABILITY OVERVIEW Ghana is seen as a stable business-friendly location within Africa, bolstered by its strong economic growth including a 7% rise in GDP in 2012. Consequently, it remains an attractive location for many international occupiers. Ghana is traditionally known for its cocoa production, and this industry continues to be a important constituent of the economy. However, the mining sector and an emergent oil production are driving growth at the moment, with multinational companies such as Alcoa and Chevron active within the market. Another developing sector within Ghana is telecommunications, where companies like Vodafone are already present. Economic growth is expected to be driven by these key sectors in the future as the government looks to keep the economy moving forward by focusing on industrial development. Although agriculture accounts for a large proportion of the workforce, industries such as mining, oil production and telecommunications are anticipated to become more prominent in the future. It is hoped that this will enable the government to improve infrastructure levels across the country, which should in turn help improve per capita GDP and sustain Ghana’s position as one of the more business friendly locations within Africa. OFFICE MARKET OVERVIEW The capital city of Ghana, Accra, serves as both the commercial and administrative centre of the country. Accra possesses a well developed office market, with the CBD concentrated around the city’s main high street. However, this location suffers from a poor level of infrastructure as well as particularly severe traffic congestion. There remains a lack of modern, high quality space within the CBD, and consequently, a number of occupiers are looking at the more decentralised parts of Accra – such as close to the airport – in order to secure space. As a result, schemes such as One Airport Square are being developed with an estimated 30,000 sq. meter of high quality space expected to come onto market within the next 24 months. Going forward it is anticipated that further office development will take place in the more decentralised parts of the city in preference to the traditional CBD. Demand from occupiers for high quality space has increased over the past year or so, and this has resulted in sustained rises in rental levels. Both domestic and international occupiers have been active from a number of industries – not just from the more traditional cocoa and mining businesses but, most significantly, from the financial services sector and the rapidly developing telecommunications sector. Economic Indicators Population, thousands 25,561 GDP, US$ millions 38,578 GDP per capita, US$ 1,509 CPI 9.2 Population Growth % y/y 2.3 FDI, US$ millions 3,117 GDP real % y/y 7.1 Prime Office Rent Q1 2013 (USD/sq. meter/year) ACCRA (Asking Rent) 480 Key Industries Cocoa production, mining, lumber, light manufacturing, aluminium smelting, cement, commercial ship building Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 64 Dealing with Construction Permits (Out of 185) 162 Registering Property (Out of 185) 45 Corruption Perceptions Ranking (Out of 174) 64 Political Stability and Absence ofViolence (100 = Most Stable) 51.42 Source:World Bank & Transparency International (2012) C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile THE REPUBLIC OF GHANA GLOBAL MAP REGION MAP
  34. 34. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. africa & the middle east SUITABILITY OVERVIEW Jordan is one of the smaller economies within the Middle East, where GDP has grown by just 2.7% in 2012. Output from the economy’s main constituents, including agriculture and phosphate mining, decreased over the year due to disruption from transport networks and labour disputes. Multinational occupiers are present within Jordan mostly in the financial services, pharmaceutical, and IT sectors, with companies such as Microsoft, Hewlett Packard, and Ericsson operating domestically. However, the regional political unrest has affected economic growth, with tourism revenues noticeably reduced and oil and gas pipelines sporadically interrupted. More specifically, the civil conflict in Syria has increased the strain on both the domestic economy and infrastructure, with an estimated 500,000 refugees currently residing within Jordan. Although the outlook for the economy is more positive in the years ahead, this is largely a result of an anticipated recovery in the global economy supporting a rise in exports. Jordan possesses an expanding manufacturing sector, and with some mineral wealth available (predominately phosphates), this is anticipated to be the main source of the country’s revenues. However, the risk remains that the conflict in neighbouring Syria may escalate further or may even erupt within Jordan itself, and any sustained recovery in Jordan is dependent on the subsequent easing of these regional uncertainties. OFFICE MARKET OVERVIEW Since the end of the conflict in Iraq, the office market in Jordan – principally the capital city and business hub, Amman – has witnessed a construction boom. Developers have built space with the expectation that companies will relocate from Iraq and other affected locations to Amman, Jordan’s key office market. Within Amman, the principal office submarkets are located in the 5th and 6th Circles and include the Sweifieh, Chmeissani, Mecca Street and Deir Ghabar districts. A number of corporate occupiers are located in these areas as well as the more prominent financial districts of Shmeisani and Abdali. Although Amman has experienced the development boom, Grade A space remains relatively scarce and the market is characterised by an oversupply of Grade B space. However, the growth in the development pipeline has resulted in the increased availability of larger floor-plates (circa 1,500 sq. meter). which were previously limited in availability. Furthermore, the recent social and political upheaval within Syria has supported significant demand from relatively wealthy Syrian migrants seeking residential premises. As a result, some of the abundant Grade B space is being transformed into residential space in response to the soaring residential demand levels. This high amount of supply conversion may also help to somewhat alleviate the oversupply of Grade B stock available in the market. Economic Indicators Population, thousands 6,431 GDP, US$ millions 31,025 GDP per capita, US$ 4,824 CPI 4.7 Population Growth % y/y 1.9 FDI, US$ millions 1,488 GDP real % y/y 2.7 Prime Office Rent Q1 2013 (USD/sq. meter/year) AMMAN (Asking Rent) 190 Key Industries Petroleum, petrochemicals, textiles, furniture, food processing, fertilizers Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 106 Dealing with Construction Permits (Out of 185) 102 Registering Property (Out of 185) 102 Corruption Perceptions Ranking (Out of 174) 58 Source:World Bank & Transparency International (2012) C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile THE HASHEMITE KINGDOM OF JORDAN GLOBAL MAP REGION MAP
  35. 35. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. africa & the middle east C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile SUITABILITY OVERVIEW The Kenyan economy has been slowly but steadily advancing in recent years, leading to a GDP growth of over 4% in 2012. The economy is dominated by agriculture and tourism, with the agricultural sector employing the vast majority of the Kenyan workforce. However, growth in the banking and telecommunications industries has expanded over the past few years and may help to diversify the economy away its dependence on the traditional industries. For example, recent multinational entrants to Kenya include Google and Cisco Systems, with the capital city, Nairobi, the most sought after location. Inflation and youth unemployment will remain the primary short term concerns within the economy, as food prices may rise further if agricultural output fluctuates. Because agriculture is heavily dependent on harvest yields and global commodity prices – which can often be unstable – the government is looking towards financial services and telecommunications to move the economy forwards. In the longer term, much-needed infrastructural improvements, as well as the continuing famine in the north, may prove to be major concerns for both business confidence and the improvement of living standards, particularly if resolutions are not found quickly. OFFICE MARKET OVERVIEW Nairobi is both the capital city and commercial centre of Kenya. It is also one of the more mature office markets within Africa, with an established CBD and a good supply of modern space. Nairobi is increasingly sought after as a destination for multinational occupiers and is growing in notability as one of Sub Saharan Africa’s key commercial hubs. Indeed, business prominence has supported a large number of multinational companies from a variety of sectors establishing a presence in Nairobi, mostly as a base for their east African operations. Away from the CBD, Nairobi’s key office locations are Waiyaki Way, Riverside Drive, Mombasa Road, Upperhill, and Gigiri. Tenant preference is for modern high quality space in the core submarkets, particularly in the submarkets away from the CBD which continues to suffer from severe traffic congestion. Indeed, recent demand has largely been driven by local tenants relocating out of the CBD. Office supply in the decentralised submarkets of Nairobi has continued to rise over the past few years, with approximately half of it located in the Westlands part of the city. The steady development pipeline of prime space is beginning to keep pace with recent demand levels, and as a result, rents have recently stabilized. With demand levels expected to remain steady over the next year or so, rents for high quality space should remain under pressure. Economic Indicators Population, thousands 42,840 GDP, US$ millions 42,262 GDP per capita, US$ 986 CPI 9.4 Population Growth % y/y 2.8 FDI, US$ millions 357 GDP real % y/y 4.3 Prime Office Rent Q1 2013 (USD/sq. meter/year) NAIROBI (Asking Rent) 180 Key Industries Tourism, agriculture, forestry, fishing, financial services Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 121 Dealing with Construction Permits (Out of 185) 45 Registering Property (Out of 185) 161 Corruption Perceptions Ranking (Out of 174) 139 Political Stability and Absence ofViolence (100 = Most Stable) 9.91 Source:World Bank & Transparency International (2012) THE REPUBLIC OF KENYA GLOBAL MAP REGION MAP
  36. 36. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. africa & the middle east SUITABILITY OVERVIEW Lebanon’s economy has slowed noticeably over the last year or so, with GDP growth slipping to only 1% in 2012 as export levels declined and tourist numbers were significantly reduced. Political uncertainty within Lebanon has been exacerbated by the ongoing difficulties within neighbouring Syria, and this has had a halting effect on economic activity. The majority of multinational occupiers present within Lebanon derive from the banking and financial services sectors, including companies such as HSBC and Standard Chartered. Other prominent sectors include IT and pharmaceuticals, where multinationals such as Metlife Alico, GE, Ericsson, Nokia, and Sanofi Aventis are operating within Lebanon. The outlook for the economy remains uncertain, and therefore the expectation is that GDP growth will remain subdued. Any improvement in the economy is dependent on any noticeable progress in terms of resolving the political uncertainty within Lebanon – notwithstanding the ongoing conflict in neighbouring Syria, which also currently is without resolution. However, any long-term recovery is expected to be driven by the dominant construction and banking sectors, as infrastructure levels need to be improved or redeveloped in order to sustain business activity growth. OFFICE MARKET OVERVIEW The key office market within Lebanon is located in Beirut, the capital city. At the current time, the market is strong, with relatively high demand for Grade A office space and larger floorplates of a minimum of 1,000 sq. meter. The supply of this space type is most sought after by multinational occupiers and is largely limited to the Beirut Central District (BCD) where safety and security measures are implemented for sustained business activity. However, the lack of modern, good quality space within both the BCD and the suburbs of Beirut combined with consistent occupier demand are together eroding Grade A supply levels. Pre-lets strategies are becoming paramount for developers and occupiers looking to secure high quality space at relatively competitive rental prices. As a result, multinational occupiers are starting to relocate to the suburban locations within Beirut in order to reduce rental levels and find space befitting of their interest. Furthermore, the unstable political situation within the region is increasing the cautious outlook of many occupiers, with most reluctant to commit to expansion plans or to larger capital-expenditure-based projects. Consequently, a number of plans are either on hold or the tenant has opted for an annual lease until the disruption eases. Economic Indicators Population, thousands 4,291 GDP, US$ millions 43,156 GDP per capita, US$ 10,058 CPI 6.6 Population Growth % y/y 0.7 FDI, US$ millions 3,523 GDP real % y/y 1.0 Prime Office Rent Q1 2013 (USD/sq. meter/year) BEIRUT (Asking Rent) 450 Key Industries Banking, tourism, food, agriculture, textiles, mineral & chemical products Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) 115 Dealing with Construction Permits (Out of 185) 172 Registering Property (Out of 185) 108 Corruption Perceptions Ranking (Out of 174) 128 Source:World Bank & Transparency International (2012) C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile THE REBUBLIC OF LEBANON GLOBAL MAP REGION MAP
  37. 37. Click on each country for specific detail on its suitability, including an overview of its economic indicators, risk profile, and commercial property market. africa & the middle east SUITABILITY OVERVIEW The Libyan economy remains dominated by the oil industry which currently represents 90% of the country’s total budget. Although the industry experienced a decline in 2011, a swift rebound has resulted in GDP levels recovering appreciably. The quick resumption in oil production was largely due to the expertise of a number of multinational operators. The recent upturn has also seen companies such as Shell, Exxon, Total, Repsol, BP, and Occidental establish operations within Libya. Although the political landscape has dramatically changed over the past two years, public protests and political uncertainty remain significant. However, the quick recovery in oil production has enabled public finances to improve, and consequently a surplus is accumulating, prompting business confidence to recover. Furthermore, with oil production expected to return to full capacity around 2014, the government should be able to use the budget surplus in order to undertake a considerable and rapid infrastructure program, bringing much needed improvements to ageing networks. This should help to stimulate FDI levels not only from the oil sector but from those companies that can provide crucial expertise in updating and overhauling large systems and facilities. OFFICE MARKET OVERVIEW After the recent political upheaval within Libya, the country is gradually coming to terms with the post al-Qadhafi regime, although there still remain periodic episodes of protest and aggression. Concerning Libya’s property market, most of the existing high quality office buildings are clustered to the west of the Medina and the centre of Tripoli, as well as in the more residential Gargaresh district. Demand is largely derived from the re-emergent oil sector, which largely re-entered the country following the cessation of the internal uprising. Therefore, it is primarily energy based companies that have instigated the building of Energy City – a mixed-use commercial centre specifically for energy companies – on the outskirts of Tripoli, around 70km from the city centre. Regarding office developments, the Al-Tadamom Twin Towers was completed in 2010, adding over 50,000 sq. meter of office space to the market. It is the fourth major office high-rise in Tripoli, joining the Al Fateh Tower (now called the Tripoli Tower), Corinthia and Five Towers. Additionally, the recently completed Burj Al Baher complex has seen impressive occupancy rates, although Tower 69 is still ongoing and due for completion in the next few year or so. Economic Indicators Population, thousands 6,455 GDP, US$ millions 70,233 GDP per capita, US$ 10,879 CPI 6.1 Population Growth % y/y 0.8 FDI, US$ millions 2,705 GDP real % y/y 104 Prime Office Rent Q1 2013 (USD/sq. meter/year) TRIPOLI (Asking Rent) 480 Key Industries Oil and gas production, metals, food processing, textiles, cement Source: Cushman & Wakefield, Oxford Economics (2012), Rental rate as of Q1 2013 Risk Rankings Ease of Doing Business Overall Ranking (Out of 185) N/A Dealing with Construction Permits (Out of 185) N/A Registering Property (Out of 185) N/A Corruption Perceptions Ranking (Out of 174) 160 Political Stability and Absence ofViolence (100 = Most Stable) 16.98 Source:World Bank & Transparency International (2012) C&W ranked the economic indicators and risk factors in each region to showcase how each country ranks within its respective region. The rankings are as follows: Top Quartile Second Quartile Third Quartile Bottom Quartile THE STATE OF LIBYA GLOBAL MAP REGION MAP

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