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Where are the city properties that are selling at auction prices? - La Nacion Propiedades
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Dónde están las propiedades de la ciudad que se venden a precios de remate
Lo que hay que saber antes de comprarlas: realmente son un buen negocio
www.lanacion.com.ar
August 13, 2024
By Nicholas Bal
What you need to know before buying them: they really are a good deal
Some class B offices are offered at ridiculous prices PATRICIO PIDAL/AFV
Despite the economic uncertainty and the succession of new developments that the first half of 2024 brought to the real estate sector in general, the class B office market has been experiencing remarkable stability in terms of asking prices per square meter ˗with a slight decrease of less than 1% compared to the last six months of 2023˗ and vacancy ˗decreased by 0.67%, while remaining above historical values. And although net absorption experienced a decrease that is reflected in a decrease in demand, it continues to be positive, with 7,502 m² and a stock totaling 1,271,663 m², according to a survey by the real estate agency LJ Ramos.
At the same time, the rental market shows more optimistic figures: the surface area demanded grew by 93.04% compared to 2023 (28,427 m²) in the first part of the year , boosted by the proclamation of smaller spaces as well as the new demands of small and medium-sized companies that, in most cases, are forced to optimize operating costs, but also by an increasingly established hybrid work modality.
These properties in the San Nicolás neighborhood are located in the order of US$1236 per square meterPATRICIO PIDAL - AFV
And although the Puerto Madero submarket is the one that experienced the greatest increases in terms of prices, it is the San Nicolás area and its surrounding areas that, despite having suffered a drastic drop ˗not only as a result of the pandemic, but also due to the decentralization towards the north of the City of Buenos Aires that had already begun prior to that period, with the development of new hubs, such as the Libertador Corridor or the DOT˗, today shows almost "derisory" values in comparison with these areas of growing demand.
Downtown: Opportunity Values or High-Risk Investment?
Understanding whether the idea of buying an office that is not suitable for living in these areas could mean a buying opportunity or rather an “adventure” with considerable risk, requires concrete figures for a pertinent analysis. Variability aside, the average listing value of these properties in the San Nicolás neighborhood is around US$1,236 per square meter, according to data provided by the same report.The fact is that in this sector of the city, which is showing a depressed market, there have been closings on streets such as Viamonte, Montevideo and Florida at prices that fluctuated between US$478/m² and US$988/m² , according to specialists consulted, versus segments such as residential, where properties are listed at an average value of US$1,450/m² and close at around US$1,350/m². In fact, on Corrientes Avenue, “an office that was listed at US$800/m² a short time ago was sold for US$688/m², 14% less ,” highlights Fernando Alsina, broker at Toribio Achával.
Of course, this submarket was “very affected after the pandemic, and demand never returned to previous levels, resulting in a high supply ,” says Marcos Ballario Rota, research analyst at LJ Ramos. That is what has caused a significant devaluation of properties in this area. For this reason, the Buenos Aires government is concerned about putting the spotlight on this area with the goal of “recovering its value and reestablishing it as a busy place, as it was before.”
According to specialists, the drop in listing prices for Class B offices will continue for some time.PATRICIO PIDAL - AFV
Given the almost non-existent number of transactions, “ we can guarantee that the drop in listing prices is here to stay for a while yet ,” warns Alsina. In itself, there are good opportunities for offices not suitable for use as housing, there is a significant supply of this type of property: “Many of them are listed or have been sold at very low historical prices. Those who buy find a good offer, and those who sell may need the money and have not had any candidates for a long time,” he explains.
The biggest question is whether, in this scenario, these properties can actually be revalued. And while it is possible, it is “very difficult to achieve this through private initiative alone,” says Marcos Ballario Rota. Therefore, it is crucial that the public sector “also participates, by providing tax incentives. This would allow investors to allocate the necessary funds to make these properties attractive,” he adds.
Depending on the case, "technical updates could be made to enhance the value of the property and present it to the market in an opportunity to attract investors," adds Julián Peña, a broker at Cushman & Wakefield. That said, in order to see a recovery in the sector "local regulations will need to support companies that want to enter the country or expand existing operations."
Offices in Florida 400 in old and stately buildings
The state of “small” offices in downtown Buenos Aires
Although the conditions of these properties vary in each case depending on the construction quality , age of the building and type of company that has occupied the apartment, " they are usually in a condition that ranges from good or very good in the best cases, where improvements or maintenance were carried out, to average," Peña points out.Generally speaking, Class B offices in this submarket have old facades and many of them cannot be modified due to their status as cultural heritage. “They are not open-plan, they have high ceilings, they are low-rise buildings, they have wooden floors and they have obsolete technology in both refrigeration equipment and security systems,” says Ballario Rota.
Another drawback of these properties is that they require a significant initial outlay on the part of the buyer , which is crucial to increase their visibility and stand out in the market. Since they are old offices, “they often lack adequate maintenance, and investment is key to making them competitive.” Thinking of them as a purchase opportunity, the expert understands that they can be modernized to “get them ready and make them attractive for future users/tenants.” But it is vital that the owners “know the reality of the market, trying to adjust the values to minimum, reasonable levels.”
Because what the market sees is that “ companies looking to rent (Editor’s note: today prices range between US$3/m² and US$13/14/m² per month) want an office that does not require the slightest intervention , both due to the significant investments and the time required to implement the adaptation,” Alsina warns.
Many offices have quality construction
Role models?
Unlike other cities that have experienced the deterioration of their historical/financial centre, in Buenos Aires “that will never happen, quite the opposite” , says the broker of Toribio Achával. The reasons? The strategic location of the downtown area as the nerve centre of the GBA “when one looks at the north, the west and the south, it is strategic”. Additionally, the proximity to icons of the city, such as Avenida 9 de Julio, the Teatro Colón, the Casa Rosada and numerous tourist points of interest, make the downtown area, at some point, capable of being transformed. Of course, we must go beyond the offices, according to experts: “We have had foreign investors from Spain who are analyzing and have come especially to buy buildings in blocks in the downtown area to recycle them and sell/rent the units individually”, he reveals.And if one example is enough, Mexico City is an example in this regard. After the pandemic, “the idea of converting offices into housing arose with the aim of revitalizing uninhabited areas , offering tax benefits to encourage these projects,” explains Ballario Rota. From 2017 to 2024, 19 office projects, covering approximately 412,000 m², have been converted into housing, hospitals or schools.
“This strategy has proven to be effective, achieving a more efficient use of available space and contributing to the recovery of the real estate market after the pandemic,” he points out. Similarly, in New York, an office conversion program was implemented in response to the aforementioned crisis. This program estimates the creation of approximately 20,000 new homes, as it allows more office buildings to be “transformed” into residential spaces.
In several countries, for example, the amenities in the area have been expanded and improved with more and better gastronomic offerings, commercial premises, gyms, among others. But the challenge remains in attracting employees of each company to go to their workplace. “As companies have more regulatory tools to achieve this objective, we will notice a greater circulation of people and a natural revaluation of the environment as a result,” concludes the Cushman & Wakefield broker.
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