Turnkey projects help Colombian market reinvent itself
The new turnkey real estate model is becoming more popular and benefits both owners and tenants.
We are in the process of adapting to a new reality globally due to the pandemic. Companies and owners of commercial spaces turn to creativity to imagine the new environment of the real estate market.
Finding an office or commercial space ready to be occupied just when and where an expanding company needs it, is one way to improve a company's performance. They are the spaces that do not require to be significantly adapted due to their flexibility. With that in mind, many building owners have been proactive in negotiating the rent of their properties, especially in Bogota, where the office market is the biggest one in the country. Therefore, the turnkey model has become a way to attract and retain tenants by decreasing the initial investment of tenants and helping the sector to reinvent itself.
"In Bogota, we realized that the owners are still flexible in terms of commercial conditions, always looking to make the business viable. Prices tend to stabilize. We believe that in 2020-21, we will experience another market momentum.”
"The Colombian office market has been greatly affected by the economy and fiscal policy in recent years. Many companies are assessing their actual need for their office space, reducing their occupied area, or consolidating isolated operations into larger properties, taking advantage of current opportunities. The power of negotiation remains favorable for tenants, "says Biagio Arevalo, Director of Turnkey Services at JLL for the NLA region.
In the turnkey model, the company looking for an office presents its occupancy requirements and the owner makes the investment of the occupancy project according to their needs. The owner makes the investments, or with an entity that finances the improvements by delivering the finished property, ready to go into operation. Depending on the form of the contract, these costs may be included in the rental and are amortized during the contract term. In compensation, the contract has a longer duration. Thus, both sides can Benefit.
"It’s a negotiating model that adapts to the time of the market, a way to attract tenants, even better when the landlord has additional capital to invest," says the JLL specialist.
Advantages of the turnkey model
- Delivered space, executed according to required standards, ready to be occupied
- The adaptation is realized on behalf of the owner.
- Office accommodation costs included in the lease cost (OPEX) and diluted during the contract.
- Saving time and money.
- Property occupancy within a shorter time.
- The additional investment improves the return of the total investment (ROI).
- Retention of the tenant for a longer period.
- It is possible to renegotiate the lease during the term of the contract (review), according to the current market time.
JLL turnkey with guaranteed maximum price
We comprehensively develop turnkey projects - from the collection of the specific order through the search for space along with our transactions department, including design and construction execution up to the project delivery.
We are, at the same time, an architecture and construction company. With this integrated process, a typical turnkey project takes about three months: one month for the execution of the design and planning stages, and two months for the construction work,” explains Biagio Arevalo, Director of Turnkey Services at JLL.
This integration represents significant savings. "Because the process is faster, the client often enters the property before the grace period ends. If you negotiated a six-month grace period, when you move in three, you saved three months of rent," he explains.
And the economy does not stop there. JLL prepares studies and cost estimates that allow stipulating and guaranteeing the maximum price to invest in the project. "We have the power to negotiate with the best partner suppliers at competitive prices," says Biagio Arevalo.
Resuming activities around the world will surely take several months, as a part of JLL, the global leader in real estate services specializing in commercial properties, we are here to collaborate with companies and investors to optimize the real estate processes.
For more information, contact:
JLL, North Latin America