Colombia’s commercial real estate market, like most countries globally, suffered from a rising number of vacancies in the first half of 2020. A recovery followed towards the end of the year but what is the outlook for 2021?

The reality is a bit of a mixed picture. Growth in pandemic-resilient businesses such as e-commerce, data centres and logistics, is offsetting the reduced demand for office space.

By the end of the third quarter of 2020, the vacancy rate in Colombia’s two largest cities had increased 50% from the end of 2019 up to 15%. A Vice President of CBRE in Colombia said, “There was a good recovery in Q4 2020, so by the end of the year we saw the vacancy rate at around 12.6% in Bogotá and 9% in Medellín.”

This was before the second wave of coronavirus infections hit the country. A commercial property lawyer in Bogotá is not optimistic about 2021, “Office take-up will remain low throughout 2021, but some sectors will outperform, we are seeing increased demand for e-commerce storage and facilities to cut delivery times.”

“Office take-up will remain low throughout 2021, but some sectors will outperform, we are seeing increased demand for e-commerce storage and facilities to cut delivery times.”

Commercial property lawyer, Bogotá

Data centres are another growth driver for real estate demand, an industry analyst notes, “There are more than 20 large data centres in Colombia and the sector is growing, Amazon Wed Services opened last year and more are expected to follow.”

Retail real estate will be a mixed bag. Some sectors have proved resilient such as supermarkets, retail parks and storage but many high-street assets will need to be repositioned.

Residential real estate has also remained resilient, according to a residential real estate investor, 2020 was a strong year despite changes, “2020 saw our highest volume and quantum of sales, due to government incentives and changes in consumer behaviour driven by digitalisation and demand for larger homes.”

“2020 saw our highest volume and quantum of sales, due to government incentives and changes in consumer behaviour driven by digitalisation and demand for larger homes.”

Residential real estate investor, Bogota

Residential real estate companies and investors in Colombia also usually hold a mixture of social interest housing (vivienda de interés social, VIS, up to COP 150,000,000) and non-VIS plots, which provides them with some shielding from macroeconomic trends. A civil engineer in Bogotá believes the VIS market is currently attractive for investors, “The best cities to look at are Bogotá, Barranquilla and Cali, especially in new VIS projects on the outskirts of the cities. With the new teleworking dynamic these areas are primed for high and short-term returns (3 – 4 years).”

In terms of challenges facing the residential property sector, an executive of a house-building firm told us, “Difficulties for foreign investors are, i) exchange rates, ii) understanding accounting, legal and tax rules, iii) getting planning permission and obviously pandemic related challenges such as new work schedules, rising unemployment, inflation and continued restrictions on movement.”