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Venezuela Real Estate Report Q4 2010
Business Monitor International, Aug 2010, Pages: 56
The Venezuela Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Venezuela's Real Estate industry.
Following BMI’s interviews with in-country sources in Venezuela at the beginning of the year, we concluded that ‘stagnating’ is probably the single adjective that best captures the position and prospects of that country’s commercial Real Estate sector. Having spoken to our sources again in mid-2010, this remains the case.
Traditionally, the markets for office, retail and industrial property have been distorted by the persistent inflation in the country which, in turn, is the consequence of the monetisation of public spending. Both rents and capital values have risen by 20-30% annually, with the result that yields have been fairly stable. Tenants are usually required to re-sign leases every year. Because of the extension of the public sector into the private sector – both through the imposition of price controls and outright nationalisation – investor sentiment remains dismal. Our sources in Venezuela confirmed that the few new commercial Real Estate projects under way in Caracas and elsewhere have been put on hold. Real capital values of property would probably fall – but for the tendency of tenants to buy the premises that they are occupying if the opportunity presents itself.
In the short-term, the dislocations caused by the lack of hydro-electricity – and the consequent need for many of Venezuela’s larger enterprises to operate well below capacity – are also unhelpful. Inside Venezuela itself, opinion is divided as to whether rents for commercial Real Estate will continue to rise. In our projections, we assume that yields will continue to rise gradually – even as nominal rents and capital values move broadly in line with each other.
Interviews of in-country sources were conducted in early February 2010.
Key Features Of This Report
This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. The questions that we seek to answer for each country remain as follows: What are the main issues for actors in and around real estate development in the country concerned, over both the long and the short term? What are the main constraints that they face? What are the key insights to be gleaned by comparing the real estate sector of a country with its regional peers?
In Q3 we introduced a very substantial improvement to our reports. We incorporated data and qualitative observations provided to us by commercial real estate agents operating in the countries we survey. As a result we have gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors – office, retail and industrial. We have also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology section of this report.
In Q4, we have incorporated a lot of new data in relation to rents and yields in 2010. We gained this data through a new round of interviews with our in-country sources in mid-2010. In some cases, the latest information from our sources has caused us to make significant revisions to our forecasts for 2011-2014. We asked our sources to indicate what growth in rents is likely for 2011. We explain their answers in the Forecast Scenarios.
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