BMI View : Years of economic mismanagement and the fall in the price of oil have plunged Venezuela into an economic crisis. Private sector investment has shrunk and consumer purchasing power has been eroded due to hyper-inflation. The worsening economic conditions have impacted negatively on all three sectors of the commercial property market and we do not expect this to change in the short term .
Venezuela's economy has continued to deteriorate since our last report. Diminished oil production and dwindling revenues are raising concerns over the country's ability to meet its debt obligations. The exchange rate has depreciated and crime and violence has become more prevalent amid widespread scarcity of goods. The country's short term growth prospects are bleak. Runaway inflation and structural imbalances are likely to keep the economy in recession in 2016 and 2017 as exports plummet and private and public sector investment contracts. BMI forecasts indicate a fall of 7% in GDP this year and a further decline of 1.6% in 2017.
Against a backdrop of economic recession and subdued service sector investment, the office market is likely to witness a fall in tenant demand. This is likely to lead to a decline in rental values in real terms and we do not expect this to change in the short term. Over the past year as inflation has continued to increase, there has been a tendency for tenants to buy the office buildings they rent in order to find a safe haven in equity rather than cash and mitigate against the erosion of their capital.
The retail real estate sector is also being impacted by economic contraction and the erosion of consumes' purchasing power due to high inflation. Rental values are set to decline due to a lack of retailer demand and the general shortage of goods that characterises the retail scene. Although the longer term trend is expected to be more positive given rising population, while the economy remains weak, the retail real estate sector will continue to remain subdued.
The industrial real estate market is driven mainly by trade and the strength of the retail sector in general. Higher consumer demand means higher imports and greater need for warehouses in order to move goods around nationally. The current conditions mean that not only exports are suffering, but imports have fallen sharply, reducing demand for distribution and warehousing space. We believe the market will remain weak in the next two years and expect rental values to fall during this period.
On the whole, economic and political uncertainty will continue to negatively impact on the commercial property sector in the near term. Thereafter, the future performance of the sector will depend largely on how successfully Venezuela manages to turn around its economy going forward.
The Venezuela Real Estate Report features BMI Research's market assessment and independent forecasts of major construction projects in the residential and commercial markets, plus rental prices and yields in major cities. The report critically analyses the prospects for real estate within the broader economic and financial context - both domestic and global - via our econometrically-modelled and clearly explained banking and economic forecasts and follows this through to evaluate the implications for REITs.
BMI's Venezuela Real Estate Report provides industry professionals and strategists, sector analysts, business investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the real estate industry in Venezuela.
- Benchmark BMI's independent real estate industry forecasts for Venezuela to test other views - a key input for successful budgeting and strategic business planning in the Venezuelan real estate market.
- Target business opportunities and risks in Venezuela through our reviews of latest industry trends, regulatory changes and major deals, projects and investments.
- Assess the activities, strategy and market position of your competitors, partners and clients via our company profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering real estate and construction, regulatory changes, major investments and projects and significant national and multinational company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the real estate sector and within the broader political, financial, economic and business environment.
Industry Forecasts Outlook
Historic data series (2010-2013) and forecasts to end-2019 for the domestic real estate industry and for the local and global finance industry.
- Real Estate: Office, retail and industrial real estate yields for all major cities (%); short term forecasts on minimum and maximum real estate rental prices by sub-sector (USD per square metre and local currency per square metre).
- Construction: Industry value (USDbn); contribution to GDP (%); employment (‘000); real growth (%).
- economy: Economic growth (%); nominal GDP (USDbn); unemployment (%); interest rates (%); exchange rate (against USD).
BMI’s Real Estate Risk Reward Index
BMI’s Risk Reward Indices provide investors (real estate vendors, construction companies and financial investors) looking for opportunities in the region with a clear country comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide an indices of highest to lowest appeal to investors, with each position explained.
Overview of the real estate sector, including analysis of existing/planned real estate developments and emerging industry trends in the office, industrial and commercial sectors
Features detailed city-level data and analysis on rental prices, yields, contract terms and real estate availability with separate chapters covering the office, retail and industrial sub-sectors.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate Company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.