Peru Real Estate Report Q1 2012

The outlook for Peru’s property market is positive, underpinned by strong economic growth and rising domestic consumption combined with low unemployment. However, deteriorating global economic growth, and a consequent higher aversion to riskier assets by global investors, could present risk to our optimistic forecasts over the next year or so. Peru is export-dependent and therefore would be adversely affected by a double-dip recession or in particular a hard landing in China, its second largest export market. Peru is also heavily dependent on its mining industry, which may see a minor setback in the short term due to recent protests and escalating violence as a result of the planned extension of the Yanacocha mine in the country’s north-west.
Key Opportunities In The Real Estate Market:
?? Real GDP growth in Peru is forecast by BMI to be at 6.7% in 2011 and 5.8% in 2012. Economic growth is being largely driven by domestic consumption, business confidence, exports and construction. This backdrop provides strong support for property demand.
?? According to a recent survey by Global Property Guide, Lima is a ‘spectacular’ destination for buy-tolet properties, with high rental yields of 10-11%. Public accolades of this kind could increase commercial investor interest in both the city and the country as a whole.
?? Peru ranks first in Latin America for improving business regulation, according to a November 2010 report by the International Finance Corporation and the World Bank. Peru has moved up 10 places in the global ranking of 183 economies. However, according to Jones Lang LaSalle’s Global Real Estate Transparency Index 2010, Peru is ranked poorly, at 72nd out of the 81 countries surveyed in 2010.
?? China has made significant trade inroads into Latin America, largely as a result of its appetite for minerals. Among other partnerships in the region, China has become Peru’s second largest trading partner for imports and exports, after the US, as of December 2010.
Key Risks To The Real Estate Market: ?? Both China and the US are potentially risky export destinations at present, with the wider global economy seeing debt fears and regional fiscal crises. This could have a knock-on effect on Peru’s real estate development.
?? Peru’s dependence on mining means that if protests continue around the Yanacocha mine there could be a short-term decrease in productivity, which could affect numerous other branches of the country’s economy.

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Executive Summary 5
SWOT Analysis 7
Peru Real Estate/Construction SWOT 7
Peru Economic SWOT 8
Peru Business Environment SWOT 9
Real Estate Market Overview 10
Real Estate Market Analysis 11
Table: Peru’s Real Estate Market – Rentals, 2010 And 2011 (m2/month, US$) 13
Table: Peru’s Real Estate Market – Net Yield, 2011 And 2012 (%) 13
Table: Peru’s Real Estate Market –Terms Of Contract/Lease, Mid-2011 14
Table: Peru’s Real Estate Market – Available (m2) And Vacant Space (%), Mid-2011 14
Industry Forecast Scenario 15
Real Estate Outlook 15
Table: Peru’s Real Estate Market – Rentals, 2010-2012 (m²/month, US$) 16
Table: Peru’s Real Estate Market –Net Yield, 2008-2016 (%) 17
Construction And Infrastructure Outlook 18
Table: Peru Construction And Infrastructure Industry Data And Forecasts, 2008-2016 18
Construction and Infrastructure Forecast Scenario 20
Macroeconomic Outlook 22
Peru - Economic Activity, 2011-2016 23
Business Environment 24
Table: Peru Real Estate Business Ratings 24
Peru’s Business Environment 24
Table: BMI Business And Operation Risk Ratings 25
Table: BMI Legal Framework Rating 26
Table: Labour Force Quality 29
Table: Annual Foreign Direct Investment Into Latin America, 2006-2008 31
Table: Trade And Investment Ratings 32
Table: Peru’s Top Export Destinations, 2003-2009 (US$mn) 33
Competitive Landscape 35
Company Profiles 36
Abengoa 36
Cemento Andino 37
Cementos Lima 38
Cementos Pacasmayo 39
Centros Comerciales del Peru (CCPSA) 41
Cosapi 42
Graña y Montero (GyM) 43
Inversiones Centenario 45
Los Portales 46
Negocios e Inmuebles 47
BMI Methodology 48
How We Generate Our Industry Forecasts 48
Construction Industry 49
Bank Lending 50
Real Estate/Construction Business Environment Rating 50
Table: Weighting Of Indicators 51
Sources 53
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