In-depth valuation of commercial and investment properties

Beyond fundamental metrics, such as property type, year of construction, built area, and Gross Leasable Area (GLA), an in-depth technical valuation considers specific attributes that can enhance or penalize the asset's value.

In the local market, these are the key differentiators:

• Layout and functionality: Optimized spaces that allow for flexibility of use, especially in Multifamily models where efficiency per square meter is vital.

• Balconies and private outdoor areas: An element that has become non-negotiable in the premium residential and corporate segments post-pandemic.

• Condition and renovations: This evaluates the updated status of finishes and, most importantly, the plumbing and electrical networks.

• Sustainability and Climate Control: In warm-climate cities, efficient air conditioning systems are critical; generally, having EDGE or LEED certifications adds a premium to the sale value.

• Heritage Restrictions: The level of architectural conservation (Assets of Cultural Interest - BIC, for its acronym in Spanish) can be an aesthetic value, but also a development constraint that must be rigorously evaluated.

• Technical Specifications: The presence of high-speed elevators, full-backup power generators, water reserve tanks, and visitor parking.

• Income Stability: In investment assets, full occupancy and the quality of active leases (WALT - Weighted Average Lease Term) are factors that ensure the asset's liquidity.

To define the true commercial value of your building or multifamily asset, it is essential to integrate the most recent comparable transactions into the analysis. These benchmarks allow us to identify the pricing drivers and the value per square meter at which similar assets are currently trading.

In this analysis, we evaluate critical criteria such as:

• Strategic location: Not only the sector, but also access to amenities, transportation, and the neighborhood's projected appreciation.

• Asset condition: State of preservation, modernization of common areas, and compliance with technical standards.

• Closing dynamics: We differentiate between the 'list price' and actual market closing prices, providing a solid foundation to recommend a justified and competitive asking price.

This data-driven approach enables your property to not only compete but to stand out, ensuring efficient commercialization that is aligned with the expectations of both institutional and private investors.

The chosen methodology depends on the asset type and its economic purpose. For standard investment assets, such as offices, warehouses, or retail spaces, the Income Approach (Income Capitalization Method) is the primary tool. In this case, current and projected rental income serves as the baseline metric to determine value.

For complex investments, multifamily assets, or negotiations with institutional and international investors, the global standard is the Discounted Cash Flow (DCF) method. This analysis allows for the projection of long-term profitability by considering variables such as inflation, projected vacancy, and the exit Cap Rate (Capitalization Rate).

At Engel & Völkers Commercial, we apply the methodology that best suits the nature of your asset, ensuring an accurate, reliable valuation that is, above all, aligned with the realities of the Colombian real estate market.

Commercial real estate valuation demands a level of technical analysis that goes far beyond market comparables. To determine a realistic value in Colombia's current environment, it is essential to consider:

• Potential for alternative use: We evaluate whether the property has higher profitability under a use different from its current one (for example, converting an office into a multifamily asset or a warehouse into a last-mile distribution center), as permitted by the POT (Territorial Planning Plan).

• Detailed analysis of lease agreements: We analyze not only the current rent but also the tenant's strength, the WALT (Weighted Average Lease Term), escalation clauses (CPI or additional points), and vacancy risk.

• Urban and technical regulations: It is vital to audit compliance with current urban regulations, pending development levies, and the asset's technical specifications (electrical capacity, floor load capacity, fire protection systems).

• Tax and macroeconomic framework: We integrate the impact of local taxes (Property Tax, Industry and Commerce Tax - ICA) and the Banco de la República's interest rate projections, which directly influence the applied discount rates.

Due to these variables, commercial valuation requires consultants with deep financial insight and real "on-the-ground" market knowledge. At Engel & Völkers Commercial, we combine technical rigor with real transaction data to provide you with a valuation you can trust.

Understanding these two tools will allow you to make the right decision according to your needs, whether they are commercial, accounting, or legal.

1. Strategic Commercial Valuation It is a market tool designed for agile decision-making. At Engel & Völkers Commercial, we perform this valuation to define a strategic baseline for sale or lease.

• Purpose: To establish a competitive and realistic asking price.

• Approach: It is based on current supply and demand dynamics, absorption trends, and recent transactions in the sector.

• Use: Ideal for property owners looking to go to market or investors evaluating the feasibility of a purchase.

2. Technical and Legal Appraisal It is a detailed and formal report that determines the fair value of an asset, prepared by an appraiser registered in the RAI (Registro Abierto de Avaluadores / Open Register of Appraisers) and in accordance with the regulations of Law 1673 of 2013.

• Purpose: To comply with legal, financial, or tax requirements before third parties.

• Standards: It is governed by the NTS (Technical Valuation Standards) and International Valuation Standards (IVS), complying with the requirements for financial reporting under IFRS.

• Use: It is mandatory for procedures with banking institutions (mortgage loans or leasing), legal proceedings, estate successions, requirements before the DIAN (National Tax Authority), or for updating assets on a company's balance sheets.

Anticipated returns on commercial assets in Colombia are determined by a strategic matrix of location, asset class, property specifications, and tenant credit quality. There is no "one-size-fits-all" percentage, as yields –specifically Cap Rates – vary significantly based on the asset’s risk-return profile.

For instance, Core assets (such as LEED-certified offices or stabilized logistics hubs with Triple-A tenants) offer lower risk and steady distributions, while Value-Add investments (such as property repositioning or Multifamily conversions) target higher internal rates of return (IRR) through capital appreciation.

In a market like Colombia, where lease agreements are typically indexed to inflation (IPC), returns are closely tied to your chosen investment strategy and the asset’s ability to preserve value. At Engel & Völkers Commercial, we provide data-driven advisory and a clear roadmap of all investment options to ensure your portfolio aligns with your financial goals.

In Colombia, taxes are a decisive factor in the net profitability of any transaction. Profits from the sale of commercial real estate held for more than two years are subject to Capital Gains Tax (Ganancia Ocasional), which as of 2026, stands at a flat rate of 15%. A professional valuation is essential to establish the delta between the Tax Cost (Costo Fiscal) and the market price, allowing for efficient tax exposure management.

For assets held within corporate structures or Real Estate Investment Trusts (Fideicomisos), a well-founded valuation provides the technical basis for quantifying unrealized gains and utilizing tax-deferred exchange options or structural planning. Given that the DIAN (the Colombian Tax Authority) increasingly scrutinizes "fair market value" in public deeds, having a rigorous valuation protects you from future audits. For the specific tax structuring of a transaction – whether via direct deed or the transfer of fiduciary rights – we strongly recommend coordinating with a specialized tax advisor.