Q&A: What’s Really Going on With Colombia’s Office Real Estate?

After years of turmoil, the office real estate market in Colombia is undergoing unavoidable changes.

Once remote work trends took hold in the country, office real estate had to react fast. Company (and employee) preferences changed quickly, heralding a transformation in how the corporate world imagines the spaces it inhabits. Over the past couple years, businesses have been experimenting with work spaces that are more open, collaborative and, in some instances, virtually indistinguishable from a college student lounge.

NSAM spoke with Roberto Gonzalez Espinosa, Transactions and Advisory Services Director at CBRE Colombia, to get a deeper look into how the office market has been evolving in the country. 

Roberto provides details on where company demand has been trending towards, particularly in Bogota and Medellin. He also speaks of the effects of proptech in the market, as well as his thoughts on the possibility of saturation and the sorts of accommodations being demanded by businesses who’re out there shopping for office space.

NSAM: How is demand in Colombia’s office real estate market reacting to remote work trends?

Roberto Gonzalez: Remote work is no temporal trend, evidently. Actually, since the [COVID-19] pandemic, it has become a relevant factor for those seeking for a new job. Nevertheless, non-remote work is indispensable in specific sectors of the economy, which indicates that remote work isn’t permanent. 

Small and mid-sized enterprises with a digital base have been trending towards more flexible working frameworks, cutting overhead and shopping for provisional spaces where they can meet for face-to-face working sessions. This has increased demand for co-working spaces and has certainly increased the availability of offices with dimensions below 300 square-meters.

Remote work has, on the other hand, brought changes to how bigger companies and multinationals approach their activities in the real estate market. They’ve trended towards accommodating operations to their needs in matters of surface area and new standards to make a more efficient use of space. 

These companies, given their characteristics and the size of their workforce, even when they’ve readjusted their workspaces in some instances, have increased demand in the market for +1,000 square-meter offices in the traditional corridors, where supply is limited at the moment. The arrival of new companies to Colombia is also exerting pressure on that segment. 

In short, there’s higher demand and lower supply in the +1,000 square-meter market, particularly within traditional office zones. Supply remains strong, with vacant spaces, in the segment of areas below 300 square-meters.

NSAM: Various media reports point to a higher preference from office users for sustainable or environmentally friendly spaces. Are customers asking for such things? If they are, how is this trend impacting supply and prices in the real estate markets of Bogota and Medellin? 

Roberto Gonzalez: There’s a world-wide pledge to reduce the carbon footprint and incentivize environmentally sustainable practices in every sector of the economy. In that sense, the physical spaces in which companies operate play a fundamental role in incentivising such practices, which motivates businesses to shop for office buildings that aim to comply with these objectives.

For example, multinationals and bigger local companies seek to meet international standards which allow them to measure their impact, which leads to more regulated operations. International certifications, such as LEED or EDGE, are the ones most commonly found in Colombia and can be found in about 20% of the total office supply with high corporate standards in Bogota and Medellin. 

Even though demand in office real estate is still being pushed by location and pricing, sustainability standards are beginning to gain traction in the country. Supply will have to adjust itself to this trend to remain active in the market. 

Nevertheless, we still see no direct correlation between pricing and sustainability standards. But it is taken into account in relocations and when shopping for new offices.

Even though demand in office real estate is still being pushed by location and pricing, sustainability standards are beginning to gain traction in the country.

In other words, it might be a factor that accelerates the choice between buildings. 

NSAM: Office spaces have become more open, collaborative and, in some cases, residential. Is this trend seen within a market niche only or has it been more broadly adopted in Colombia?

Roberto Gonzalez: Some companies see their offices as the house of a big family, where every member can enter, interact and find elements that identify them within the company, this without losing sight of the fact that a segment of employees can work remotely. 

More and more companies from different sectors of the economy, even those who preferred closed office spaces, are adjusting their offices to incentivize collaboration between employees, aiming to consolidate a corporate culture that allows for better talent retention. 

NSAM: How has proptech affected Colombia’s office market?

Roberto Gonzalez: Support from digital tools is essential in the development and growth of Colombian real estate. Today, tech applied to the office market has allowed us to improve our capabilities for analysis, making supply more transparent and providing a greater level of detail for every element taken into account by businesses hunting for an adequate location. 

At CBRE Colombia, we provide our clients with tools or apps that apply this technology to real estate. These tools allow us to be more efficient, and they remain unmatched in our market. 

More companies from different sectors of the economy, even those who preferred closed office spaces, are adjusting their offices to incentivize collaboration between employees.

Some of these tools are focused on strategic georeference; they provide companies with data on travel times for their collaborators, providers and competitors, as well as real-time models based on the operations planned for the office space. They also provide cross-referencing of multiple databases to understand supply and the demographic and economic dynamics within each sector. 

NSAM: A report by BBVA indicates that real estate investment in Colombia is now focusing on commercial or industrial projects, with offices lagging behind. As remote work trends take hold, do you believe a recovery is possible for investment in corporate real estate? Or is stagnation the future of this segment?

Roberto Gonzalez: I see a recovery being completely viable. I dare to say that the challenges faced by the Colombian real estate market over the last couple years have made real estate investment more institutionalized, leading to more sophisticated structures and standards in the coming years. 

Nevertheless, a slowdown in investment is evident today; a slowdown driven by macroeconomic conditions affecting the country and which have elevated the cost of capital. These pressures adjust investment portfolios and diminish exposure to risk for these sorts of projects. 

NSAM: Which sorts of companies are shopping for office space in Bogota and Medellin?

Roberto Gonzalez: Demand for office space is being led mostly by businesses in the outsourcing services segment, where in-person work is considerably higher and where we’re seeing the arrival of more and more companies. 

Also, this demand is concentrated mostly in Bogota, which has a higher supply of office space and of human talent geared towards those sorts of operations, particularly in BPO. Medellin follows Bogota, seeing an important development in its real estate supply and a strengthening of the talent pool focused on servicing tech companies that’ve been landing in the city. 

NSAM: There’s talk of saturation in big cities such as Medellin and Bogota. Are there opportunities for a corporate real estate market in smaller cities?

Roberto Gonzalez:I don’t see saturation in the office markets of Bogota or Medellin. There’s a transformation in demand, yes, and supply will have to adapt to the trends required by companies. 

Cities like Bogota, Medellin and Barranquilla will continue providing opportunities for the development of new projects and the consolidation of a more institutionalized market that answers to market trends.