Different publications such as The Economist, The New York Times and Semana Magazine have warned in recent days of the challenges that the real estate sector is experiencing, in particular commerce and offices, as a result of the economic effects generated by the pandemic derived from COVID- 19 and the different containment and biosecurity measures adopted by governments worldwide.
Surely, commerce, particularly shopping centers made up of department stores and offices, as we know them today, or better as we knew them before March 2020, will undergo an important transformation not only in physical spaces but also in the destination. of existing uses, giving space to other types of services in accordance with the new demand of the real estate market.
This new reality will represent important challenges in real estate and urban planning in Colombia, both for individuals and for local authorities. In effect, in the short term, entrepreneurs and owners of this type of real estate assets will, in many cases, need to modify their planning licenses to make way for new uses that, under their planning licenses, are not contemplated or are very limited. In the medium and short term, local authorities, if they act responsibly, will also have to consider greater flexibility in land use planning plans for the coexistence and mix of uses, so that these changes can be made in an agile and efficient manner, and according to the speed demanded by the market.
The aforementioned has different causes, all due to the effects that COVID-19 has brought with it, among which are the following, which the owners of offices and commercial premises must also bear in mind:
On the one hand, it is quite probable that the purchase decisions of said goods will be postponed for a long time, which can range between 6 and 8 months, as well as the level of demand for these, which will translate into a mismatch the disposition and requirement of said assets. On the other hand, the rent of the same has supported and will continue to do a downward trend, a direct consequence of the dramatic cut in income that tenants have had, a product, in the vast majority of cases, of the loss of employment, a circumstance that can lead to differences between real estate companies, landlords and office owners.
The aforementioned causes will produce a considerable increase in the supply of offices and commercial premises, which, in economic terms, will generate per se, as is already evident, a decrease in the sale or rental price, which will surely promote the review of the current legal businesses to which these properties are the subject, which will lead to their renegotiation.
Given the outlook so far exposed in terms of the challenges facing the private sector and the effects it has had and will continue to endure as a result of COVID-19, it is essential that said sector, through specialized legal advice in the areas of urban and real estate law, structure actions through which these effects can be prevented, as far as possible, or, failing that, mitigate them, such as, the review of current urban planning licenses and land use plans – among other instruments-, the review of the contracts currently in force of which the properties referred to in this article are the object, and the determination of the risks that could materialize in a conflict resolution scenario, v. gr., a judicial process.
If we do not think about the above, the lack of adaptation of real estate assets to the new demand or coexistence of uses will inevitably trigger a greater impact on the economic effects that the real estate sector has perceived to date, which plays a very important role in the country’s economy.
That is why we invite you to rethink your needs in relation to the destination that your assets currently present, in accordance with new trends and demand in terms of uses, thus avoiding a greater economic impact and even a repercussion in the face of the eventual devaluation in your assets. assets.
For this, it is advisable to review the current and real situation of your assets against the dynamics of the market, and if required, obtain an ideal accompaniment in the modification of your urban planning licenses, as well as in the physical adaptation of the properties, according to the new legal requirements required for the destination of new uses.
By María Camila Parra (senior associate), and Paola Garzón (associate) of the Practice Group Real Estate & amp; Urbanístico by Gómez-Pinzón Abogados.