Buenos Aires Real Estate

The rent in the northern corridor of Buenos Aires may be cheaper, from Vicente Lopez to Olivos to the Panamerican, but that is not helping fill the office spaces that are currently for rent in the Buenos Aires real estate market. The area was designed with businesses in mind: not only with the cheaper rent (up to 30% less than in Capital Federal), but with milder traffic, and even the close proximity to many CEOs who live in the area.

While there is a smattering of businesses that have happily settled into this area, about one third of the triple A offices is empty, and cannot seem to find tenants. This percentage is nearly three times as high as that recorded in Buenos Aires, which sits at about 11.7%.

When the economy was expanding at incredible rates, companies were confronted with the inconvenience that they didn’t have any place to settle in the center of town, neither in the Leandro N. Alem area, nor near the Obelisk. Furthermore, they were faced with prices of around US$38 per m2, monthly, to be in an area crowded with cars and daily protests.

Thinking that that era of plenty would last longer than it did, developers set out to the north of Buenos Aires, opening more spaces for the future growth and opportunity that was sure to come. They believed that new firms would arrive in the country, or that existing companies would see the benefits of moving, and spend the money to do so.

The buildings in the north of Buenos Aires are great, with air conditioning, modern designs, green spaces and plenty of parking. But there were several details that developers failed to recognize, such as the higher taxes in the province, and with harder economic times, many of the companies that had planned to come backed out.

In addition, the savings to be found by moving from the center (where the m2 costs about US$30 per month) to the north (where the m2 costs around US$22, monthly) gets greatly diluted by the additional costs that a transfer incurs. It is also necessary to calculate that moving installations from one place to another costs about US$400 per m2. In a company with 2,000 m2, that adds up to about US$800,000, which is not easily payable in a time of such small profit margins.

There are a handful of companies who have successfully and happily moved to the north, but simply not with the speed that the developers anticipated.

Still, the owners of the buildings are relaxed, knowing that their properties in the Buenos Aires real estate market are at least maintaining their value. Profitability is at 9% annually — a stark contrast to the 15% in the ’90s — which means many see this class of  real estate as one of insurance, because the rental contracts are quite long. Many of those that had millions of dollars saved in American or European banks suffered quite a scare with the recent crisis, and decided to invest that money in local buildings, which have a reputation for maintaining their value.