Research. INDUSTRIAL REAL ESTATE Just confidence BUENOS AIRES 1Q17 INDUSTRIAL MARKET. Industrial

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1 INDUSTRIAL REAL ESTATE Just confidence Real Estate Market The first quarter of 2017 had much in common with the fourth quarter of 2016: high expectations, new macroeconomic environment, anti-money laundering measures, multinational companies, investment funds, consulting and more consulting, to name just a few of the most repeated terms of recent months. Throughout the first quarter, there were many signs that raised expectations of future improvements. Submarkets Market Analysis - Premium Warehouse Class A North West South San Eduardo Triangle On the one hand, large foreign investment funds are working to diversify their portfolios of options. On the other hand, companies that had postponed their plans during the last few years have begun to review their strategies and are expanding projects in order to achieve regional competitiveness. Thus, large logistics centers and premium industrial developers are well-positioned to become the best investment options. Developers and investors are starting to search for better opportunities. Several projects are currently under construction that will enter the market in the near future. All of this further mobilizes the industrial real estate market of Buenos Aires. Argentina Capital City Buenos Aires Population 43,420,000 GDP MM (2016) US$ 689,7 GDP per capita (2016) US$ 15,884 Currency Peso Unemployment Rate 7.6% Market Summary Premium Warehouse Current Quarter Prior Quarter Year Ago Prior Total Inventory (SF) 20,9MM 20,9MM 1,9,6MM Vacancy (%) 9.1% 9.1% 5.2% Average Asking Rent U$7.77 U$7.73 U$7.62 Forecast

2 Inventory Composition Premium Warehouse Inventory Composition Premium Warehouse Buenos Aires is the largest industrial property market in Argentina with approximately 1.9 million square meters of Class A warehouse space and over 4,000 acres of industrial parks, representing 50.0% of the entire country s market. GDP Vacancy changed very little over first quarter of Just as some companies have had to adapt to new scenarios, others, mostly multinationals, have begun to review expansion plans they had put on hold in recent years. * Logistics Activity The past year could be remembered as the year of logistics costs. It is important to understand that logistics activity itself is not price-creating. Rather, the costs that determine their tariffs originate mostly in fuel values, tax burden and labor cost, among others, which are all indicators defined by third parties. Freight transport and logistics currently represent a very difficult problem to solve, as shown by the traffic in and around Buenos Aires. Source: Banco Mundial Argentina s Exchange Rate - CPI The situation is even more complex in the city s Southern Corridor, as the largest number of cargo trucks circulates in this area. About 30,000 trucks per day circulate around the capital, of which 60.0% pass through the south. The Southern Corridor is an interesting opportunity for large logistic developers due to its proximity to the capital and the port, available land with good market values and low amounts of available premium spaces. Source: Banco de la Nación Argentina, INDEC INDEC Source Calculated through the price for the consumer geometrical average calculated by statistical institutes

3 In short, the Buenos Aires industrial sector will consolidate and grow. Companies are starting to think of outsourcing. New companies are opening up to the outsourcing of logistics. If things improve, the logistics sector will be favored. From the main access routes to the Great Buenos, construction sites can be observed along the Pan-American Highway, Ezeiza-Cañuelas Highway and West Access, to name but a few. In recent years, because of the exchange rate difference, industrialists have invested in their own plants, as the possibilities of exporting to other countries makes them require more space, whether to manufacture or to store and distribute. The inventory of Class A warehouse space continues to increase, while the gap in square meters built in each submarket remains stable. The most in-demand areas are the North and West of Greater Buenos Aires. Demand is mainly focused on secure locations with easy access to routes or highways that are also close to the areas of consumption. In contrast, the South Corridor still maintains a large number of industrial sectors, with important advantages due to its proximity to the Port of Buenos Aires, although many have old or outdated service infrastructure. Argentine real estate priced in U.S. dollars is cheap, since the same amount of square meters in Uruguay, Paraguay, Brazil, Chile or Colombia are much more expensive. Regarding construction costs per square meter, there were no major variations these months as measured by the Argentine Chamber of Construction indices, which best reflect the movements in market prices. As for construction companies, the industrial pulse continues at a good pace. This perspective not only translates into the number of operations and statistics that affect the activity but also in increased amount of warehouse space under construction the greater number of construction of warehouse space destined for both the factory and the logistics sectors. As proof of the sector s expansion, there are currently around 250,000 square meters under construction. This indicates a very active market, one that encourages companies to invest in their own assets rather than incur rental costs. The areas that drive the orders for new projects are logistics, auto parts, food, pharmaceutical and electronics. Building materials are mostly metal structures with large lights and free heights of 10 or 12 meters, watertight metal roofs made in the same work, thermal insulation for conservation of energy and human comfort, mixed perimetric enclosures in masonry of concrete blocks and pre-painted trapezoidal plate, while floors are seamless with 1,000-square-meter cloths with laser technology and compensated retraction concrete. As for global construction trends, sustainable warehouses and other ecological initiatives gained space within the green wave that is now a trend in the market. A widely used tool is LEED certification, which enables ecological buildings to be assessed through objective design guidelines and quantifiable parameters. Companies, especially multinationals, are increasingly interested in developing sustainable construction in line with global and integrated ecological policies. Rental rates for premium warehouse space have not changed substantially, remaining around $7.00/SM. Average rates in industrial parks are around $87.70/SM and may reach $170.00/SM in some of the Northern submarket s premium industrial parks.

4 Premium Warehouse Total Vacancy Vacancy Ave. Asking Inventory Rate Rate Rent (SF) (SF) (%) (U$/SF/YR) NORTH 14,377,879 1,140, % $8.81 WEST 875, , % $7.47 SOUTH 5,660, , % $7.02 TOTAL 20,914,257 1,902, % $7.77 and Logistic Parks Total Vacancy Vacancy Ave. Asking Inventory Rate Rate Sale (SF) (SF) (%) (U$/m²) NORTH 320,764, ,475, % $ WEST 29,923,642 6,081, % $64.90 SOUTH 105,486,220 6,027, % $75.80 TOTAL 456,174, % $87.70

5 Newmark Grubb Bacre HEADQUARTERS 1515 Olazabal St, Suite C203 CABA 1428, Argentina Alejandro Winokur Co-founder and President Manager Mariana Stossl Market Research Newmark Grubb BACRE Glossary of Terms Absorption A measure of the change in occupied space Availability Space marketed for lease regardless of when the space will be available or whether the space is vacant or occupied Deliveries The total RBA of properties added to the inventory once construction has been completed Direct Space Available space offered for lease by the building owner, landlord, or owner representative Leasing Activity The volume of leases signed including new leases, direct and sublet leases, extensions and renewals, and leases signed in proposed or under construction buildings Occupancy Any space physically occupied by a tenant, regardless of lease status of the space Rentable Building Area (RBA) A measurement of the total square feet in a building including the tenant and common areas such as the lobby and hallways Sublet Space Available space offered for lease by a building tenant seeking a subtenant to fulfill the remaining lease obligation Under Construction Buildings under construction are defined by the time the foundation is poured through the time the building is certified for occupancy Vacancy Space not physically occupied by a tenant, regardless of the lease status or availability of space Weighted Average Rent The asking dollar amount for the use of available space, weighted by size--the average does not include negotiable or unpublished rates and is reported as full service including operating costs Newmark Grubb Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents. Newmark Grubb Knight Frank Research Reports are also available at All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Grubb Knight Frank (NGKF) has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of NGKF. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient s choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of NGKF, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains.