Selling commercial real estate successfully

A commercial property (or for commercial use) is a real estate asset whose economic purpose is the generation of income through commercial activities, the provision of services, or logistics. Its main regulation is found in the Territorial Ordering Plans (POT) of each municipality, which define the "land use".
Main types of commercial properties:

• Commercial Premises: Physical spaces open to the public in streets, neighborhoods, or shopping centers, intended for the buying and selling of goods (stores, restaurants, pharmacies).

• Offices: Spaces designed for administrative, professional, or corporate work. They can be individual offices or be located in business centers under Horizontal Property.

• Warehouses and Industrial Parks: Spaces for storage, production, or logistics. In Colombia, these are usually classified according to environmental impact (low, medium, or high) defined by local regulations.

• Consulting Rooms: Properties specialized for health services, which must comply with the authorization standards of the Ministry of Health.

• Shopping Centers and Convenience Centers (Strip Malls): Complexes that group multiple premises under a single administration.

• Hotels and Apartasuites: Properties intended for tourist or corporate accommodation, subject to the National Tourism Registry (RNT).

1. Occasional Gain Tax

In Colombia, the profit from the sale of fixed assets held for more than two years is taxed under the Occasional Gain Tax, whose rate for 2026 is 15%. There are important exemptions that can optimize your profitability:

• Exemption for primary residence: The first 5,000 UVT of the profit (approximately $261,870,000 COP for 2026) may be exempt if the property was your residence and the money is reinvested in another home or used to pay a mortgage loan.

• Adjustments to fiscal cost: Using the annual increases authorized by the Government or updated cadastral appraisals allows you to legally reduce the taxable base.

2. Performance vs. interest rates

The real estate market in Colombia reacts directly to the decisions of the Banco de la República. Currently, with an intervention rate that has stabilized around 11.25%, we are in an environment of greater certainty for financial planning. A scenario of stable or downward-trending rates usually encourages demand, facilitating deal closures and access to mortgage loans for buyers.

3. Sustainability & energy efficiency

Although the European Renewable Heat Act does not apply in Colombia, the local market increasingly values properties with sustainable construction certifications such as EDGE or LEED. Properties with high energy efficiency, water-saving systems, and low environmental impact materials not only access preferential "Green Rates" in banks, but are also achieving higher sale prices and faster absorption in the market.

4. Portfolio optimization

Selling can be a strategic move if your objective is asset rotation. In the current context, many investors are liquidating lower-yield properties to reinvest in assets with greater appreciation potential or in more dynamic segments, such as logistics or short-term rentals.

Although a direct sale avoids paying the brokerage commission (which in the Colombian commercial market usually ranges between 3% and 5%), the technical challenges may outweigh the initial savings:

1. A "closed-door" market (Off-market)

The high-end real estate market in Colombia is predominantly opaque. Many of the most important transactions in Bogotá, Medellín, or Barranquilla are carried out "off-market". Without a broker, the seller usually lacks access to:

• Private Equity Funds and FICs (Collective Investment Funds).

• Family Offices and large business groups.

• Institutional investors who do not search for properties on public platforms.

2.Valuation by Discounted Cash Flow (DCF)

Valuing a commercial property in Colombia goes far beyond price per square meter. It requires complex financial models that include:

• DCF Modeling (Discounted Cash Flow): Crucial to determine the real value based on projections of future income.

• Cap Rate Analysis (Capitalization Rate): Incorrect assumptions about vacancy risk, tenant profile, or CAPEX (deferred major maintenance) can result in severe devaluation during negotiation.

3. Legal security & Due Diligence

A structured transaction process is vital to protect both parties. In Colombia, this involves:

• Brokerage contracts aligned with the Commercial Code.

• Management of Due Diligence (title study, tax and technical situation).

• Use of Trusts (such as fiduciary mandates or commercial trusts) to ensure the secure handling of funds and compliance with closing conditions before the Notary.

To ensure a smooth and professional Due Diligence process, the following documents are considered standard:

• Certificate of Tradition and Freedom and Public Deed: The certificate must be issued by the Office of Public Instruments Registry, together with the copy of the Public Deed through which the seller acquired the property.

• Certificate of freedom from liens: In Colombia, this information is explicitly detailed in the Certificate of Tradition and Freedom mentioned above. This document must be issued no more than 30 days prior.

• Land Use Certificate or Urban Regulation: Issued by the local Planning Secretariat or an Urban Curatorship, detailing urban regulations and permitted activities.

• Property plans: Updated architectural and structural plans.

• Construction License and Occupancy Certificate: Documents issued by an Urban Curatorship that validate the legality and habitability of the building.

• Lease agreements and Rent Roll: For income-generating properties, it is essential to present current contracts and a detailed history of cash flows.

• Administration clearance certificate and financial statements: Certificate issued by the building administration, ideally accompanied by operating cost statements (OPEX) from the last 2 to 3 years.

• Property tax and utilities clearance certificates: Certificate from the municipal or district Treasury Secretariat, along with proof of payment for water, electricity, gas, and telecommunications.

• Specific permits depending on the type of asset: Depending on the activity, a Health Concept, Commercial Registration, Fire Department certificate, among others, may be required.

In practice, the transfer of real estate in Colombia is an operation excluded from VAT. However, the overall tax treatment depends on the structure of the transaction and the type of seller. Here are the key points:

1. VAT on new properties and construction cost

Unlike other countries, in Colombia the sale of new properties by developers does not generate VAT (19%) on the final sale price. However, the VAT that the developer paid on materials and services during construction is considered a higher cost value and not a deductible tax, which is already reflected in the market price.

2. Habitual seller rule (Income vs. Occasional Gain)

• Although there is no VAT, the tax authority observes “habituality”:

• Occasional seller: If the asset was held for more than 2 years, the Occasional Gain tax applies (15%).

• Habitual seller: If the main business is buying and selling real estate, the profit is taxed as Ordinary Income (with a rate that for 2026 is around 35% for legal entities), which significantly impacts return on investment.

3. Asset sale vs. Share sale (or Trust Rights)

• To optimize tax burden and notarial costs, many transactions of income-generating assets in Colombia are not carried out through direct property transfer deeds, but through:

• Assignment of trust rights: If the property is held in a trust, the rights are assigned, which can simplify procedures.

• Share sale: The company that owns the asset is sold (Share Deal), which may have different tax implications regarding profit determination.

4. Notary & registration costs

Although it is not a “tax” like VAT, every commercial property sale must consider Notary and Registration Costs, which together are usually between 2.5% and 3% of the transaction value and are typically shared between buyer and seller according to local custom.

The information provided above is for general guidance purposes only and does not constitute legal, tax, or investment advice. Although every effort has been made to ensure the accuracy of the data as of 2026, no responsibility is accepted for errors or omissions. It is strongly recommended to obtain independent professional advice tailored to your specific situation before proceeding with any transaction.