For over a year, dust has accumulated on empty desks in offices throughout the Coastal Region.
Commercial real estate from Buenos Aires to Bogotá lacks the usual hustle and bustle as repeated coronavirus outbreaks force companies to keep employees at home.
“We saw a general shock in demand for office space in Costa Rica, Panama and the Central American region, ”said Jose Gonzalez, director of marketing research and consulting at a real estate services company. Cushman & wakefield…
“It hit harder than the 2008 and 2009 financial crises. We’ve never seen anything like this before. But that doesn’t mean the office is disappearing. “
More recently, big tech corporations like Google, Facebook and Amazon have been announced that they are postponing the return to the office until 2022 (and will likely make vaccination mandatory for these returnees). More likely, others will follow.
So what does this mean for the Coastal real estate market? With the uncertainty surrounding returning to work and questions about whether the office will continue to play a central role in the company’s life, we are looking at trends that could influence decisions about renting and buying space in the Coastal Coast today and in the future. near future.
A flight to quality based on employee experience
As companies look back and try to figure out that they are next to move into real estate, many are deciding to cut back on office space before returning to the post-pandemic era. Some prefer re-plan your spaces akin to the WeWork model, in which employees are expected to divide their time between home and office. Hot tables are replacing permanent workplaces, while innovation, focus, and quiet rooms are becoming more popular.
The market for second-rate offices is gaining momentum.
“At the end of 2020, we saw that 90,000 m2 of office space was vacated, which is a large amount for a market of 2.5 million square meters. But at the same time, we had many companies occupying new premises in more modern buildings, aiming for quality, ”said Andres Cardona, vice president of consulting and transaction services at the company. CBRE Colombia…
In addition to the pandemic-related reshuffle and environmental considerations that could affect the choice of a company’s office, employee experience is another factor on the road to quality. While Class B offices offer basic amenities, Class A and A + buildings provide improved touch-free access, large parking spaces and, in some cases, treadmills.
“In Costa Rica, there may have been no investment in Class B buildings in 20 years. This modernization of inventory in the market is aimed at talent, and at attracting and retaining them, ”explained Gonzalez.
Will real estate vacancies grow?
In the case of Costa Rica, the number of vacancies rose sharply during the pandemic. “Before the pandemic, the vacancy rate was 12% or less. Now we are talking about 18%. That’s a lot of growth, ”Gonzalez said.
When the vacancy rate in the market exceeds 17%, the market is considered excessive and effectively becomes a “buyer’s market”, which means that prices fall as landlords competitively search for people for their space.
“We forecast that the number of vacancies could reach 24% in the next 12-18 months,” added Gonzalez.
As with any market, behavior is the result of many factors, and the situation with commercial real estate in Costa Rica is no different. While Covid-19 has undoubtedly sparked a drop in interest, the commercial market will soon see a flood of new space that will further increase the vacancy rate before it settles down.
“There are several important projects currently under development that will soon add a lot of inventory to the market. This will add another 100,000 m2, ”said Gonzalez.
However, this is not the case everywhere. According to the CBRE Outlook for July 2021, the vacancy rate in the Bogota office market will fall from a peak of 13% at the end of this year to 11% in 2023. much of this trend.
However, the vacancy rate for Class B buildings is on an upward trend since 2019. By Q2 2021, the vacancy rate reached 16%, up from 5% two years earlier, and almost reached the buyer’s market territory.
In other markets, the vacancy rate may remain higher for a longer period. One example is Santa Fe, a financial and business district in western Mexico City. Although it serves many of the world’s largest companies, it is a recently renovated area and adequate housing and infrastructure services remain a challenge.
“Santa Fe has a more dramatic situation,” Cardona said. “Currently the vacancy rate is 50%.”
Companies that know how to save
Experts say that since the dust of the pandemic has not yet settled, commercial property prices are currently mysterious.
“Companies that know the realities of the market have the opportunity to do excellent business” – Andres Cardona
“The price per meter has not changed, but the difference between the asking price and the closing price has changed,” Cardona said, referring to the Colombian market. “Over the past 18 months, it has become wider, and companies that know the realities of the market have the opportunity to conduct successful business. Landlords are afraid of empty spaces. “
In about 40 states in the United States, closing prices for real estate sales are published. Most Latin American countries do not, including Colombia, Costa Rica and Panama. This opacity can mean that companies need to reach out to industry experts to understand the reality on the ground.
“Quoted prices in Costa Rice have dropped by about 5% over the past year,” Gonzalez said. “While the gap between listing and closing prices can typically be between 7% and 10%, we do not see gaps between 15% and, in some cases, 20%.”
Return with a stutter, depending on the operation
Coastal Latin America and Caribbean offerings tend to revolve around back office services, although availability technically oriented services remains on the rise. It is these back office services that take longer to get back to the office, Gonzalez said.
“There is nothing better than doing business face to face,” explained Gonzalez. “And front office operations — customer transactions — go back to the office first.”
“We hear from clients that HR, marketing, financial services and similar functions have delivered good performance metrics from home, so they will be held back.” – Jose Gonzalez
Those companies that operate in banking, consulting, architecture and similar industries are seeing most of their workforce returning, he said. But even in these industries, back office workers will stay at home until the pandemic – at least in most cases – has passed.
“We hear from customers that HR, marketing, Financial services and similar features have produced good performance figures from home, so they will be held back, ”he said.
It remains to be seen if back office employees will ever return to the office full-time, or if the office they return to will be the same office they left.
Colombia’s data center boom
Global digital transformation and the legacy to cloud migration that many companies are undertaking requires significant space in the data center. While we may like to think of the cloud without physical constraints, in reality, the data must be stored somewhere. Andrés Cardona says that this place will be Colombia.
“The data center is booming,” Cardona said. “So far, the largest data center area in Colombia was 7,500 m2. We are currently in talks with two data centers, each of which will be 100,000 m2. “
Colombia’s strategic location on the coast, and a convenient point between North and South America, is one of the factors contributing to this. But the same is happening with the efforts of the Colombian government, public and private institutions to position Colombia, including Bogota and Medellin, as a major tech market in Latin America, competing with other places like Buenos Aires and Guadalajara.