EMIS Insights - Colombia Real Estate and Construction Sector Report 2018 - 2019

COLOMBIA
REAL ESTATE &

CONSTRUCTION
SECTOR 2018/2019
An EMIS Insights Industry Report
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ABBREVIATIONS
ANI National Infrastructure Agency
CAMACOL Colombian Chamber of Construction
CCI Colombian Chamber of Infrastructure
CONFIS Superior Council of Fiscal Policy
COP Colombian Peso
DANE National Administrative Department of Statistics
DNP National Planning Department
FRECH Reserve Fund for the Stabilisation of the Mortgage Portfolio
GVA Gross Value Added
IDB Inter-American Development Bank
IMF International Monetary Fund
INVIAS National Roads Institute
MMW Minimum Monthly Wage
OECD Organisation for Economic Co-Operation and Development
PMTI Intermodal Transport Master Plan
PNIE National Plan for Educational Infrastructure
PPP Public Private Partnership
REIT Real Estate Investment Trust
SIC Superintendence of Industry and Commerce
VIP Priority Social Interest Housing
VIS Social Interest Housing
WEF World Economic Forum


CONTENTS 01 EXECUTIVE SUMMARY
Sector in Numbers
Sector Overview
Sector Snapshot
Sector Outlook
p.5
Driving Forces
Restraining Forces
02 SECTOR IN FOCUS p.13

Main Economic Indicators
Main Sector Indicators
Gross Value Added
Cement and Concrete Production
Focus Point – Concrete Production by Department
Construction Activity
Global Positioning
Foreign Direct Investment
Employment
03 COMPETITIVE LANDSCAPE p.25

Timeline Colombia Real Estate & Construction
Highlights
Top Companies
Top M&A Deals
M&A Activity, 2016-H1 2018
04 COMPANIES IN FOCUS p.31

Constructora Conconcreto SA
Construcciones El Condor SA
Odinsa SA
Cementos Argos SA
Manufacturas de Cemento SA
05 REGULATORY ENVIRONMENT p.42

Government Policy

CONTENTS 06 RESIDENTIAL CONSTRUCTION p.48
Highlights
Main Events
Residential Building Permits
Focus Point – Floor Area of Residential Building
Permits by Department
Residential Construction Activity
Residential Construction Costs
New Housing Unit Sales
New Housing Unit Prices
Mortgage Loans
Focus Point – Outstanding Mortgage Loans by
Department
07 NON-RESIDENTIAL p.62
CONSTRUCTION
Highlights
Main Events
Non-Residential Building Permits
Focus Point – Floor Area of Non-Residential
Building Permits by Department
Non-Residential Construction Activity
Office Market
08 INFRASTRUCTURE p.71
CONSTRUCTION
Highlights
Main Events
Quality of Infrastructure
Infrastructure Construction Activity
Infrastructure Construction Costs
Investment in Civil Construction Works

COLOMBIA REAL ESTATE & CONSTRUCTION SECTOR 2018/2019
An EMIS Insights Industry Report CONTENTS
01
EXECUTIVE
SUMMARY

Copyright © 2018 EMIS, all rights reserved. 5
01 EXECUTIVE SUMMARY CONTENTS
Sector in Numbers
COP 3.9%
6.8% CAGR
63,298bn Construction
Sector GVA, Construction
Construction Sector GVA
Sector GVA % of GDP
2012-2017
No.64 16.5mn m2 30mn m2

Most Transparent Floor Area of Floor Area of
Real Estate Market Completed Buildings Under
Globally (JLL) Buildings Construction
USD 8.6%
424mn 1.44mn CAGR
Foreign Direct Number of Construction Sector
Investment Employees Output Forecast
Inflow 2018-2022
Note: Data for 2017.

Source: CEIC, Central Bank of Colombia, DANE, CAMACOL, JLL, BMI Research
COLOMBIA REAL ESTATE & CONSTRUCTION SECTOR 2018/2019 6

Sector Overview
Construction is the sixth-largest economic sector in Colombia, accounting for 6.8% of the country’s
GDP, 3% of total FDI inflow and 6.3% of formal employment in 2017. Over the 2012-2016 period, the
construction sector emerged as one of the main driving forces of the Colombian economy, expanding
its GVA at a strong CAGR of 5.4%, favoured by high government spending on transport infrastructure,
the launch of social housing programmes and robust demand for modern office and logistics
buildings. Nevertheless, in 2017, the sector entered into a correction, due to the overall economic
slowdown, a decrease in the purchasing power of households and high borrowing costs. However,
construction activity is set to pick up in 2018 in line with the acceleration of the economy, an
enhanced regulatory framework, and renewed interest of investors towards large infrastructure
projects in the country implemented under the 4G programme.
Entry Modes
The main entry modes in the construction sector are public auctions for concessions of infrastructure
projects, greenfield investments, and mergers and acquisitions. In terms of residential construction,
the high degree of fragmentation of the market facilitates the rapid entry of new players. On the
other hand, significant entry barriers exist in infrastructure construction, which is dominated by large
companies of both domestic and foreign origin. Nevertheless, the subsector remains attractive to both
strategic and financial investors mainly due to the adoption of the public-private partnership (PPP)
model for large infrastructure projects in the country. This was evidenced by US asset manager
BlackRock, which in May 2017 created its first infrastructure investment vehicle in Colombia with
initial capital of USD 280mn.
Segment Opportunities
The country’s housing shortage and deficient transport infrastructure present the biggest growth
opportunities for new and existing players. An enhanced public procurement process and improved
legal security for both investors and lenders of infrastructure projects (adopted in the New
Infrastructure Law from January 2018) have recovered investor confidence, thus accelerating the
implementation of the 4G programme. The residential market, which has seen prices stabilise, also
offers opportunities for home acquisition, and for investment purchases. Moreover, the office market
is expected to bottom-out in 2018 and return to growth, supported by the improved regulatory
framework for real estate investment trusts (REITs) in Colombia and less uncertainty after the election
of the business-friendly Ivan Duque as president in June 2018.
Government Policy
Remedying the country’s social and transport infrastructure deficiencies are likely to be among the
priorities of the new administration of President Duque. However, among the most urgent tasks on
the government’s agenda are the continuation of government social housing programmes, set to
expire at end-2019, the adoption of the secondary legislation of the New Infrastructure Law – namely
typical standards for the public procurement process – and the design and feasibility studies of the
bulk of the projects included in the Intermodal Transport Master Plan (PMTI).
Source: CEIC, Central Bank of Colombia, DANE, ANI, CCI, CAMACOL, Latin Finance, EMIS Insights

Sector Snapshot
Colombia Real Estate
& Construction
Sector
CONSTRUCTION SECTOR GVA

COP 63,298bn
Residential and Non-Residential Construction GVA: COP 31,152bn
Civil Construction GVA: COP 16,189bn
Support Activities for Construction GVA: COP 15,958bn
RESIDENTIAL NON-RESIDENTIAL
CONSTRUCTION CONSTRUCTION
Number of building New housing unit Floor area of building Office buildings*
permits in 88 sales in 18 permits in 88
municipalities: departments: municipalities: Total inventory:
151,533 177,374 5.04mn m2 3.97mn m2
New launches:
Floor area of building New housing unit Floor area of building 404,000 m2
permits: sales by type: permits by type: Net absorption:
15.05mn m2 Low-end price Trade buildings: 278,400 m2
segment (up to 135 1.72mn m2 Area under
Floor area of building MMW): 95,237 Educational buildings: construction:
permits by type: Mid-segment (135- 0.86mn m2 652,000 m2
Social interest housing 435 MMW): 58,164 Warehouses: * Data for the main
(VIS): 3.45mn m2 High-end segment 0.82mn m2 business districts of the
Others: 11.61mn m2 (above 435 MMW): Office buildings: cities of Bogota, Medellin,
23,973 0.49mn m2 Cali, Cartagena, Santa
Marta, Barranquilla and
Others: 1.15mn m2 Bucaramanga
KEY PLAYERS’ NET INFRASTRUCTURE

REVENUES CONSTRUCTION
1. Constructora Conconcreto – COP 1,484bn Autopistas al Mar 1 highway: COP 3.58tn
2. Teixeira Duarte – Engenharia e Construcoes – Autopistas al Mar 2 highway: COP 3.12tn
COP 1,313bn Conexion Pacifico 1 highway: COP 3.35tn
3. Amarilo – COP 1,040bn Conexion Pacifico 2 highway: COP 2.73tn
4. Construcciones El Condor – COP 899bn
5. Odinsa – COP 851bn
Conexion Pacifico 3 highway: COP 3.71tn
Note: Data for 2017.

Source: DANE, ANI, CAMACOL, CCI, JLL, El Espectador, EMIS Company Database

Sector Snapshot: Colombia

Real Estate & Construction Sector
In 2017, the GVA of the construction sector amounted to COP 63.3tn, down by 2% y/y, the first decrease
since 2010. The sector was weakened by the slowdown in economic activity, a sluggish job market, and
higher inflation and borrowing costs, which curbed demand for residential real estate. An additional
negative impact on the purchasing power of households came from a hike in the VAT rate to 19% from
January 2017, up from 16%. On the supply side, a combination of oversupply, restricted loan financing
and growing construction costs led to postponement of new building projects. The GVA of residential
and non-residential construction therefore dropped by 5.3% y/y.
In 2017, sales of new housing units declined by 8.2% y/y to 177,374 units. Most affected were homes in
the mid- and high-end price segments, with decreases in sales of 10.3% and 19.5% y/y, respectively.
The low-end residential market remained relatively stable, with a 3.6% y/y drop in sales, supported by
government social housing programmes, including the launch of the second stage of the 100%
Subsidised Housing programme in November 2016. During the year, local construction companies
faced mounting inventories, accelerated growth in construction costs and a moderation in prices of
new residential units, which curbed construction activity. Notably, the floor area of new residential
building permits in 2017 dropped for a second consecutive year, by 7.9% y/y.
The most affected construction subsector from this challenging macroeconomic scenario in 2017 was
non-residential buildings. During the year, non-residential buildings totalling an area of 4.6mn m2
were completed in Colombia, down 16.4% y/y, with the largest drops in warehouses, trade and office
buildings. The office market was hit particularly hard. New buildings with a total area of 404,000m2
were created, exceeding demand, thus leading to an increase in vacancy rates, downward correction
in rental prices and postponement of new projects. As a result, in 2017, the floor area of non-
residential building permits declined by 11.5% y/y to 5mn m2.
In 2017, infrastructure construction was the driving force of the construction sector, with an increase
in GVA of 7.5% y/y. This was due to the majority of the infrastructure projects under the Fourth
Generation Road Concessions Programme (4G) commencing, and an advance in the implementation of
the Roads for Equity programme. However, the corruption scandal involving Brazilian construction
group Odebrecht and top government officials triggered several investigations in Colombia, delaying
the start of new projects. Nevertheless, the enhanced regulatory framework stemming from the New
Infrastructure Law, adopted in January 2018, and an uptick in economic activity, have propelled a
gradual recovery of investor confidence. As of May 2018, 21 of the 30 projects included in the 4G
programme were at various stages of construction. Moreover, 15 projects had already secured their
required financing, totalling COP 18tn, of which 58% came from foreign institutions.
Source: DANE, ANI, CAMACOL, CCI, JLL, El Espectador, EMIS Company Database

Sector Outlook
Comments
The outlook for the construction sector is positive. According to BMI Research, the sector will return to
growth in 2018, with a 3.9% y/y real increase in output, supported by a recovery in investment in
building construction – mainly residential buildings, and the advancing 4G programme. Moreover, the
sector is forecast to accelerate from 2019, expanding at real annual growth rates of above 5% through
2022. The uptick in the economy, a deceleration in inflation, and declining borrowing costs are
predicted to propel the purchasing power of households and demand for durable goods, including real
estate. The active government social housing programmes – 100% Subsidised Housing, My House Now!
and Interest Rate Subsidies programme – will continue to be a major driver for residential
construction activity. In February 2018, the government approved interest rate subsidies for home
acquisition for 140,386 low- and mid-income households by the end of 2019. In terms of non-residential
buildings, the enhanced regulatory framework for REITs and the rebound in demand for modern office
and storage facilities from the consumer-related and logistics industries are likely to attract new
investors and balance demand with supply. Infrastructure construction is set to continue to be the
driving force of the sector, supported by greater transparency and legal security for investors and
lenders of infrastructure projects, introduced in the New Infrastructure Law from January 2018, and
the proliferation of infrastructure investment funds – both of domestic and foreign origin. For 2018,
ANI estimates record-high private investments in transport infrastructure of COP 9.1tn, of which COP
8tn will be allocated to road infrastructure. The subsector will also benefit from the assurances of
president-elect Ivan Duque to preserve high public investment in infrastructure adopted in the PMTI.
Main Sector Indicators Forecast

2018f 2019f 2020f 2021f 2022f
Construction Industry Output Value, COP bn 88,519 96,355 105,167 114,262 123,324
Construction Industry Output Value, real y/y change, % 3.9 5.5 6.1 5.8 5.1
Construction Industry Output Value, % of GDP 9.1 9.0 9.4 9.6 9.7
Infrastructure Industry Output Value, COP bn 44,903 49,628 54,091 58,307 62,078
Infrastructure Industry Output Value, real y/y change, % 5.0 7.2 5.9 4.9 3.6
Source: BMI Research, ANI, Ministry of Housing, City and Territory

Driving Forces
The development of the construction sector is closely connected to overall economic activity, the size
of the mortgage loan market, government social housing programmes, and public spending on
infrastructure. The rebound in the economy from 2018 onwards will gradually restore demand for
modern office and logistics buildings, thus propelling higher construction activity. Additionally, an
increase in consumer confidence and declining borrowing costs will support the residential building
market. However, the main driving force of the sector will be infrastructure construction, backed by a
substantial project pipeline and renewed interest of foreign construction companies, banks and
institutional investors in the execution of large infrastructure projects in the country.
External
In the medium-term, the construction sector will benefit from an uptick in the Colombian economy,
with the IMF forecasting the country’s GDP to grow at a CAGR of 3.5% over the 2018-2022 period,
supported by strengthened investments and exports, an upward trend in oil prices, and advancing
structural reforms. An additional positive impact will come from lower inflationary pressures, which
led the Central Bank of Colombia to cut its benchmark interest rate to 4.25% in June 2018, down from
7.5% in December 2016, thus easing access to new loan financing. Government programmes aimed at
reducing the housing shortage and improving the national social and transport infrastructure will
continue to be major driving forces. Recent government reforms, aimed at enhancing the public
procurement process, increasing legal security for both investors and lenders of infrastructure
projects, and promoting the development of REITs – including listing their shares on the Colombia
Stock Exchange – are expected to spur private investments in both the real estate market and the
infrastructure construction subsector.
Internal
Infrastructure construction will continue to be the main driver of the sector in the medium-term,
supported by the execution of large road infrastructure projects under the 4G programme, based on
the PPP model. This model has proven to be quite attractive for both domestic and foreign investors,
as it guarantees above-average returns for a relatively long period of time (up to 30 years). Moreover,
in April 2018, Colombia was recognised by the World Bank as the world’s third most competitive
country in terms of regulation for financing of infrastructure projects under PPP. Aside from major
local and foreign construction companies, the 4G programme also attracted several foreign banks and
institutional investors, such as BlackRock (United States), Goldman Sachs (United States), Sumitomo
Mitsui (Japan) and Credit Agricole (France). Furthermore, following the accession of Colombia to the
OECD in May 2018, ANI announced that several new foreign investors, including three pension funds,
ten private equity funds and various Chinese investors, have expressed interest in investing in the
infrastructure projects implemented under the 4G programme.
Source: CEIC, CAMACOL, DANE, INVIAS, ANI, CCI, Central Bank of Colombia, IMF, World Bank, Portafolio, EMIS Insights

Restraining Forces
Although construction activity is expected to return to growth in 2018, a series of obstacles may still
hamper the sector’s development. On the external front, rising costs of construction materials,
stemming from the upward trend in international oil and metal prices, coupled with the uncertainty
related to the new policies of president-elect Ivan Duque, are the major constraints. Moreover, the
major corruption scandal surrounding Brazilian construction group Odebrecht and the subsequent
investigations of public contracts in Colombia are likely to continue to undermine investor confidence.
Additional efforts are required to resolve several structural problems in the real estate market, which
was assessed as having low transparency in a report by the US consultancy JLL in June 2018.
External
Although a recovery in international oil prices since late 2017 will have a positive effect on the
Colombian economy in the medium-term by raising public revenues and investments, it has already
hampered the construction sector in the form of higher prices of construction materials. In 2017, for
the first time in four years, construction costs for residential buildings and heavy civil construction
projects rose above the inflation rate, due to double-digit increases in the prices of liquid asphalt and
metal sheets. The weak real estate market in 2017 lowered the profitability of sector companies. An
additional restraining factor facing the sector is uncertainty regarding the continuation of
government social housing programmes – My House Now! and the Interest Rate Subsidies programme
– which expire at end-2019. In addition, despite the pledges of president-elect Ivan Duque to revise the
peace accord with the FARC guerrilla group, approved by Congress in December 2016, smaller guerrilla
groups – such as the National Liberation Army – continue to pose security risks for the development of
the construction sector.
Internal
Among the main internal constraints for the development of the construction sector is the still-low
transparency of the real estate market, which hampers investor sentiment. In 2018, Colombia ranked
64th out of 100 countries in the Global Real Estate Transparency Index of the US consultancy JLL, well
below other countries in Latin America, such as Argentina, Brazil, Chile, Mexico and Peru. Despite an
improvement in rankings compared to 2016, Colombia continues to underperform in terms of property
rights, governance of listed real estate vehicles, availability of performance measurement data and
sustainability. Corrupt practices in the implementation of public construction projects also act as
major constraints. The scandal surrounding Brazilian construction group Odebrecht in December 2016,
which triggered several corruption investigations in Colombia, postponed the commencement of new
infrastructure projects and deferred the financial closure of several 4G projects in 2017. Low-risk
investors may decide to exit the country due to the investigations, which could lead to additional
delays in large infrastructure projects.
Source: CAMACOL, DANE, INVIAS, ANI, JLL, Portafolio, El Tiempo, EMIS Insights

02
SECTOR
IN FOCUS

02 SECTOR IN FOCUS CONTENTS
Main Economic Indicators
2012 2013 2014 2015 2016 2017 2018
Total Population, mn, year-end 46.6 47.1 47.7 48.2 48.7 49.3 n/a
GDP, current prices, COP bn 665,884 713,627 762,903 804,692 863,877 928,067 228,456a
GDP, constant prices, y/y change, % 3.90 4.57 4.73 2.96 1.96 1.79 2.18a
GDP per Capita, USD, current prices 7,950 8,104 7,999 6,089 5,800 6,380 n/a
Consumer Price Index, y/y change, % 2.4 1.9 3.7 6.8 5.7 4.1 3.2b
Unemployment Rate, period-average, % 10.4 9.6 9.1 8.9 9.2 9.4 9.7b
Exchange Rate USD/COP, period-end 1,772 1,923 2,392 3,149 3,001 2,972 2,891b
Monetary Policy Rate, period-end, % 4.25 3.25 4.50 5.75 7.50 4.75 4.25b
Total Exports, FOB, USD mn 60,125 58,824 54,857 35,969 31,757 37,766 13,383c
Total Imports, CIF, USD mn 59,111 59,381 64,029 54,058 44,890 46,076 15,691c
Trade Balance, USD mn 1,014 -558 -9,172 -18,088 -13,133 -8,309 -2,308c
Total FDI Inflow in Colombia, USD mn 15,039 16,210 16,168 11,723 13,850 13,924 2,133a
FDI Inflow in Construction Sector, USD mn 401.5 353.5 647.8 692.9 619.9 423.6 201.6a
FDI Inflow in Construction Sector, % of total 2.67 2.18 4.01 5.91 4.48 3.04 9.45a
a January-March, b May, c January-April

Source: CEIC, DANE, Central Bank of Colombia, OANDA

Main Sector Indicators
2012 2013 2014 2015 2016 2017 2018
Construction Sector GVA, current prices, COP bn 39,856 47,992 55,568 58,042 64,923 63,298 14,467a
Construction Sector GVA, constant prices,

4.87 0.70 12.09 6.30 3.00 -1.99 -8.16a
y/y change, %
Construction Sector GVA, current prices, % of GDP 6.0 6.7 7.3 7.2 7.5 6.8 6.3a
Residential and Non-Residential Construction GVA,

20,085 24,659 28,539 30,111 32,671 31,152 7,238a
current prices, COP bn

3.7 -11.0 13.1 6.4 5.4 -5.3 -9.2a
constant prices, y/y change, %

50.4 51.4 51.4 51.9 50.3 49.2 50.0a
current prices, % of Construction GVA
Civil Construction GVA, current prices, COP bn 11,809 13,444 15,449 15,906 15,528 16,189 3,433a
Civil Construction GVA, constant prices, y/y change, % 6.0 13.0 13.2 6.7 -3.2 7.5 -6.4a
Civil Construction GVA, current prices, % of

29.6 28.0 27.8 27.4 23.9 25.6 23.7a
Construction GVA
Support Activities for Building and Civil Construction

7,962 9,889 11,580 12,025 16,724 15,958 3,797a
GVA, current prices, COP bn

5.9 12.1 8.0 5.5 5.3 -4.2 -8.2a
GVA, constant prices, y/y change, %

20.0 20.6 20.8 20.7 25.8 25.2 26.2a
GVA, current prices, % of Construction GVA
Number of Employees in Construction Sector, thou,

1,284 1,387 1,445 1,400 1,409 1,445 1,264b
period-end
Number of Employees in Construction Sector, % of total 6.06 6.37 6.49 6.15 6.17 6.32 5.79b
a January-March, b March
Source: CEIC, DANE, CAMACOL

Gross Value Added
Construction Sector GVA Construction Sector GVA vs GDP
64,923 63,298 12.1%

55,568 58,042
47,992
6.3%
39,856 4.9% 4.6% 4.7%
7.5% 3.0%
6.7% 7.3% 7.2% 6.8% 3.0%
6.0% 6.3% 3.9% 2.0% 1.8% 2.2%
0.7%
14,467 -2.0%
-8.2%
2012 2013 2014 2015 2016 2017 Jan-Mar
2018 2012 2013 2014 2015 2016 2017 Jan-Mar
2018
Construction Sector GVA, current prices, COP bn

Construction Sector GVA, % of GDP Construction Sector GVA GDP
Comments
Over the 2012-2016 period, the construction sector emerged as one of the main growth drivers of the
Colombian economy, expanding its GVA at a strong CAGR of 5.4%, well above the average growth rate
of the economy (3.5%). As a result, the sector increased its contribution to overall GDP to 7.5% in 2016,
up from 6% in 2012. However, in 2017, the growth rate of the sector was interrupted. The challenging
macroeconomic environment, marked by a decelerating economy, sluggish job market, high interest
rates and lower purchasing power of households after the hike of the VAT rate to 19% from January
2017, all served to curb demand for residential real estate. On the supply side, construction companies
faced a scenario of oversupply, mounting inventories, restricted loan financing and growing
construction costs, which led to postponement of new projects. A partial relief to the sector came
from civil construction, which raised its GVA by 7.5% y/y in 2017, due to the majority of infrastructure
projects under the Fourth Generation Road Concessions Programme (4G) being started, and an
advance in the implementation of the Roads for Equity programme. However, several corruption
investigations of public contracts hampered investor sentiment and led to delays in the launch of new
infrastructure projects. Between January and March 2018, construction GVA dropped by 8.2% y/y,
decreasing across all subsectors.
Source: CEIC, DANE

Grey Cement Production Concrete Production
13.0 8.5
12.4 12.5 12.3 8.0 7.8
11.3 7.4
10.9 6.8 6.9
10.2%
10.0%
8.5% 7.6%
5.2% 6.4%
3.0%
1.4%
2.9
1.6
-1.5% -8.7%
-3.3% -10.6%
-4.2% -12.3%
2012 2013 2014 2015 2016 2017 Jan-Mar 2012 2013 2014 2015 2016 2017 Jan-Mar
2018 2018
Grey Cement Production, mn tonnes y/y change Concrete Production, mn m3 y/y change
Comments
The decrease in construction activity in 2017 also affected Colombia’s cement and concrete industries.
In 2017, the production of grey cement and concrete dropped for a second consecutive year, by 1.5%
and 10.6% y/y, respectively. Concrete output was negatively affected by a sharp contraction in demand
from the non-residential construction subsector, due to oversupply and falling rental prices, which
postponed the construction of several office and trade buildings. Delays in the launch of new
infrastructure projects of the government’s 4G programme, due to the ongoing corruption
investigations that hampered the confidence of both investors and financial institutions, lowered
demand for concrete from the civil construction subsector by 5.4% y/y.
Production of concrete for residential buildings fell by 1.8% y/y in 2017. This was attributable to a 2.2%
reduction in output of concrete for middle- and high-end houses – the largest concrete consumer –
with a share of 79.8% of concrete demand in the residential subsector. The production of concrete for
social interest housing (VIS) fell by a marginal 0.3% y/y, supported as it was by the start of the second
stage of the government's 100% Subsidised Housing Programme in November 2016.
Source: CAMACOL, DANE


(cont’d)
Concrete Production by End User, mn m3

9.0
0.2
8.0 0.2 0.2
0.2 1.8
7.0 1.4 0.1
0.2 2.0
1.8 1.3
6.0 1.7
5.0 2.9 2.6
2.0 2.3 2.0
4.0 2.0
3.0
0.02
2.0 3.6 3.6 3.5 0.3
3.4 3.4
2.9
1.0 0.4
0.0 0.8
2012 2013 2014 2015 2016 2017 Jan-Mar 2018
Residential Construction Non-Residential Construction Civil Construction Others
Concrete Production by End User, 2016 Concrete Production by End User, 2017
Non-
Non- Residential
Residential Construction
Construction Civil 28.8% Civil
33.6% Construction Construction
17.8% 18.9%
Others 1.2%
Residential Others 2.0% Residential
Construction Construction
46.6% 51.1%

FOCUS POINT
Concrete Production by Department, thou m3, 2017
151 (2.2%)
842 (12.1%) Magdalena
Atlantico
774 (11.2%)
Antioquia
394 (5.7%)
Bolivar
280 (4%) 138 (2%)

Boyaca
Santander
492 (7.1%)
408 (5.9%) Cundinamarca
Valle del
Cauca
2,583 (37.2%)
Bogota
187 (2.7%)
686 (9.9%)
Tolima Others

Comments Construction Activity by Status,* mn m2

In 2017, buildings totalling an area of 16.5mn m2 60.0
were completed in Colombia, down 13% y/y,
6.5
according to a survey by DANE. This was 50.0 5.9 7.5
5.5
explained by decreases in the construction of 4.6
40.0
both residential (down 11.6% y/y) and non- 7.5
29.4
residential buildings (-16.4%). During the year, 30.0 24.1 26.4
29.1 30.0
apartments and houses continued to be the
major segments, with a combined share of 72.3% 20.0 29.7
of the buildings completed during the year,
10.0 18.3 17.6 19.0
followed by trade and office buildings. At the end 16.6 16.5
of March 2018, buildings with a total area of 0.0

4.6
29.7mn m2 were under construction, down 2.7% 2013 2014 2015 2016 2017 Jan-Mar
2018
y/y, outlining that the sector is still searching for
a bottom. Completed Under Construction Suspended or Inactive
Area Under Construction by Project Area of Completed Buildings by Type,*

Status,* Mar 2018 mn m2
20.0
16.0 4.3 5.5

3.8 4.7
4.6
12.0
New Projects
13.9%
8.0
Ongoing 14.0 12.8 12.9 13.5
12.0
Projects
84.1% 4.0 1.2
Restarted 3.4
Projects 0.0
1.9% 2013 2014 2015 2016 2017 Jan-Mar
2018
Residential Buildings Non-Residential Buildings
* Data for three metropolitan areas, 12 urban areas and Cundinamarca department
Source: DANE

(cont’d)
Area of Completed Buildings by Type, Area Under Construction by Type, mn m2

mn m2
9.4 18.8
Apartments Apartments
10.5 18.8
2.5 2.5
Houses Trade Buildings
3.0 2.5
1.2 1.9
Trade Buildings Houses
1.6 2.2
0.8 1.8
Office Buildings Office Buildings
1.0 2.2
0.7 0.9
Warehouses Warehouses
1.0 0.9
Mar-18
2017
Mar-17
2016
Educational 0.4 0.8
Educational Centres
Buildings 0.3 0.6
0.3 0.6
Hospitals Hotels
0.3 0.8
0.3 0.5
Hotels Hospitals
0.2 0.5
Public Administration 0.1 Public Administration 0.1

Buildings 0.2 Buildings 0.2
0.8 1.8
Others Others
0.8 1.9
Source: DANE

Global Positioning
JLL’s Global Real Estate Transparency Comments

Index, 2018
In 2018, Colombia ranked 64th in the Global Real
Rank Market Score* Estate Transparency Index of the US consultancy
1 United Kingdom 1.24 JLL, which assessed the country’s real estate
market as having low transparency. However,
2 Australia 1.32
since its 2016 ranking, the country has climbed 22
3 United States 1.37 positions, becoming one of the world’s top two
4 France 1.44 improvers over this period, along with Myanmar,
as a result of regulatory improvements, measures
5 Canada 1.45
to promote the development of the REIT market,
6 Netherlands 1.51 and greater publicly available data. The 2018 index
7 New Zealand 1.59 measured the transparency of 158 cities in 100
countries, based on 186 indicators related to
8 Germany 1.88
transaction processes, regulatory and legal
9 Ireland 1.93 frameworks, market fundamentals and
10 Sweden 1.93
sustainability.
11 Finland 1.95
Latin America in JLL’s Ranking, 2018
12 Singapore 1.97
Global Regional
Market Score*
Ranking Ranking
13 Hong Kong 1.97
37 1 Brazil 2.75
14 Japan 1.98
39 2 Mexico 2.78
15 Switzerland 2.02
50 3 Puerto Rico 3.18
16 Belgium 2.08
52 4 Chile 3.23
17 Denmark 2.11
58 5 Peru 3.47
18 Italy 2.12
59 6 Argentina 3.47
19 Spain 2.14
64 7 Colombia 3.56
20 Poland 2.15 65 8 Costa Rica 3.58
… 72 9 Uruguay 3.96
64 Colombia 3.56 79 10 Ecuador 4.10
* The score ranges from 1 (very high transparency) to 5 (total opacity)
Source: JLL

Foreign Direct Investment
Comments FDI Inflow in Construction Sector, USD

mn
Over the years 2012-2017, the construction sector
attracted a total of USD 3.1bn in foreign direct 692.9
investment (FDI), or 3.6% of total FDI in the 647.8
619.9
country for the period. Since 2014, there has been
a significant increase in foreign investor interest
in the sector, mainly due to ambitious 401.5
423.6
infrastructure plans launched by the government, 353.5
namely the Fourth Generation Road Concessions
Programme (4G), the Roads for Equity Programme 201.6
and the Intermodal Transport Master Plan (PMTI).
However, the deceleration of the economy in 2017,

coupled with the corruption scandal surrounding
Brazilian construction group Odebrecht, which 2012 2013 2014 2015 2016 2017 Jan-Mar
2018
unleashed several corruption investigations of
public contracts in Colombia, hampered foreign
investor interest. Share of Construction Sector in Total FDI
Nevertheless, FDI in the construction sector is
Inflow
expected to grow in the medium-term, supported
9.4%
by the enhanced regulatory framework for public
biddings introduced by the New Infrastructure
Law from January 2018. Implementation of the
business-friendly reform agenda of the newly 5.9%
elected president Ivan Duque is aimed at further
4.5%
enhancing the public-private partnership model 4.0%
in the construction of major infrastructure 2.7%
3.0%
projects. Notably, in the first quarter of 2018, FDI 2.2%
in the construction sector reached USD 202mn, or

nearly half that received throughout the whole of
2017. 2012 2013 2014 2015 2016 2017 Jan-Mar
2018
Source: CEIC, Central Bank of Colombia

Employment
Number of Employees in Construction Comments

Sector in Main Cities, Mar 2018, thou
Despite the decrease in construction activity
during 2017, the number of employees in the
Bogota 200.8 sector continued to grow, by 2.5% y/y, reaching
1.44mn people. This was mainly because
Medellin, Valle de Aburra 139.6 infrastructure construction activity was expected
to increase, but was also due to government
Cali, Yumbo 75.7 measures to reduce employment informality in
the sector. At the end of 2017, the construction
Barranquilla, Soledad 69.2
sector accounted for around 6.3% of total formal
employees in the country, up from 6.2% at end-
Cartagena
2016. As of March 2018, the city of Bogota
32.1
accounted for 13.9% of employment in the sector,
Bucaramanga, Giron, Piedecuesta, followed by the cities of Medellin and Valle de
31.6
Floridablanca Aburra (a combined share of 9.7%) and the cities
Cucuta, Villa del Rosario, Los of Cali and Yumbo (5.2%).
21.1
Patios, El Zulia
Number of Employees in Construction
Ibague 18.9 Sector
1,445 1,400 1,409 1,445

Villavicencio 18.7 1,387
1,284 1,264
Pereira, Dos Quebradas, La
18.4
Virginia
8.0%
Manizales, Villa Maria 13.6

4.2%
2.9% 2.5%
Pasto 12.2 0.7%
Monteria 10.5 -3.1%

-4.2%
2012 2013 2014 2015 2016 2017 Mar-18
Others 782.8
Number of Employees, thou, period-end y/y change
Source: CEIC, DANE, CAMACOL

03
COMPETITIVE
LANDSCAPE

03 COMPETITIVE LANDSCAPE CONTENTS
Timeline Colombia
Real Estate 1905 Development Milestones
& Construction The Ministry of Construction Works and Transport

is created.
1957 Development Milestones
The Colombian Chamber of Construction (CAMACOL) 1994 Development Milestones

is established.
The government launches the first Generation
Road Concessions Programme.
The Reserve Fund for the Stabilisation of the

Mortgage Portfolio (FRECH) is created to
promote housing acquisition. The Colombian Chamber of Infrastructure (CCI)

is created.
2010 Market Players
Colombian construction group Constructora

Conconcreto raises USD 49.8mn in an IPO on the
Colombia Stock Exchange. The Ministry of Housing, City and Territory

is created.
2012 Development Milestones Market Players
The government launches the 100% Subsidised Housing Colombian construction group Construcciones El
programme and the Interest Rate Subsidies programme. The Condor raises USD 458.5mn in an IPO on the
government approves Law 1,508, which sets the legal regime Colombia Stock Exchange.
for execution of public-private infrastructure projects.

The government sets into motion the Fourth
Generation Road Concessions Programme (4G). The The government launches the My House Now! housing
government adopts the Infrastructure Law 1,682. programme and the Roads for Equity public
infrastructure programme.
2017 Market Players
US asset manager BlackRock enters the infrastructure 2018 Development Milestones

construction market in Colombia, with a USD 280mn The government approves the New Infrastructure
infrastructure debt fund. Law 1,882 to enhance public procurement process.
Colombia joins the OECD.
Source: Ministry of Housing, City and Territory, CCI, ANI, INVIAS, EMIS DealWatch

Highlights
Overview
The level of competition in the construction sector varies across subsectors. Residential and non-
residential construction feature the highest level of competition, marked by the presence of a large
number of micro-, small- and medium-sized enterprises. The largest companies in the sector in terms
of assets, revenues and number of employees engage in infrastructure construction. The uptick in the
economic activity since early 2018, coupled with the improved regulatory framework for public
biddings, have renewed the interest of foreign investors towards the sector, shaping an increasingly
dynamic and competitive environment.
Market Structure
According to the latest available data by DANE, at the end of June 2017 there were 115,778 companies
operating in the construction sector in Colombia, of which 41.1% were engaged in civil construction,
24.9% in building construction, with the remainder providing support activities to construction. About
90% of these companies were small and medium-sized enterprises, with less than 200 employees and
assets lower than USD 7.3mn. In terms of country of origin, residential construction is predominantly
controlled by Colombian companies, while in the infrastructure construction and non-residential
buildings subsectors there is a considerable presence of foreign players.
Main Players
According to the EMIS Company Database, the top 20 real estate and construction companies in
Colombia posted combined net revenues of COP 12.7tn in 2017, up 14.8% y/y, equivalent to 20% of the
GVA of the sector, indicating a relatively low level of concentration. During the year, only three
companies had net revenues above COP 1tn (USD 320mn) – Colombian integrated construction firm
Constructora Conconcreto, Portuguese conglomerate Teixeira Duarte – Engenharia e Construcoes, and
Colombian home builder Amarilo. Together, they grossed COP 3.8tn in 2017, corresponding to 6.1% of
the sector’s GVA.
Market Entries
Despite the relatively high entry barriers in the construction sector, there are ample entry
opportunities for both strategic and financial investors in the infrastructure subsector, stemming from
the predominant use of the PPP model for construction and operation of large infrastructure projects.
Among the most recent entrants is US asset manager BlackRock, which in May 2017 created a USD
280mn infrastructure debt fund, focused on investments in highways and other infrastructure projects
in Colombia. The non-residential building subsector also offers strong growth potential, given the
enhanced regulatory framework for operation of REITs, adopted in December 2017.
Source: DANE, EMIS Company Database, Portafolio, El Tiempo, Latin Finance, EMIS Insights

Top Companies
Top 20 Real Estate & Construction Companies in Colombia by Net Revenues,* 2017
Net Revenues, Net Revenues, Total Assets, Return on
Ranking Company
COP bn y/y change COP bn Equity, ROE
1 Constructora Conconcreto SA 1,484 0.8% 3,097 5.7%
Teixeira Duarte – Engenharia e Construcoes – Branch in

2 1,313 29.8% 5,761 2.6%
Colombia
3 Amarilo SAS 1,040 10.7% 2,110 6.9%
4 Construcciones el Condor SA 898.7 44.1% 2,707 18.9%
5 Odinsa SA 850.9 -42.7% 5,130 10.5%
6 Concesion Costera Cartagena Barranquilla SAS 812.3 118.2% 1,668 92.8%
7 Constructora Colpatria SA 712.6 81.4% 1,928 8.9%
8 Concesion Alto Magdalena SAS 630.8 38.2% 1,333 0.0%
9 Mincivil SA 546.0 4.5% 1,052 11.5%
Construcoes e Comercio Camargo Correa SA – Branch in

10 489.9 23.7% 208.1 26.6%
Colombia
11 Concesionaria Vial de Los Andes SAS – Coviandes 479.2 -22.5% 346.5 15.2%
12 Prabyc Ingenieros SAS 465.8 90.5% 587.1 19.4%
13 Arquitectura y Concreto SAS 435.7 42.4% 1,460 7.2%
14 Marval SA 401.6 42.3% 1,281 25.3%
15 CSS Constructores SA 392.0 -24.9% 1,696 9.0%
16 Pavimentos Colombia SAS 356.9 7.4% 1,140 8.8%
17 Riesgo e Inversiones Bolivar SAS 352.2 9.0% 2,186 16.1%
18 Constructora Capital Bogota SAS 344.2 90.1% 846.7 13.9%
19 Constructora Bolivar Bogota SA 336.6 -6.8% 1,836 20.0%
20 Huertas Cotes Mario Alberto 332.3 69.8% 873.1 15.4%
* NAICS codes: 23, 531

Source: EMIS Company Database

Top M&A Deals

Top M&A Deals in Colombia’s Real Estate and Construction Sector,* 2016-H1 2018
Country of Deal Value, Stake,

Date Target Company Deal Type Buyer
Buyer USD mn %
272.2
Nov-16 Odinsa SA Minority Stake Grupo Argos SA Colombia 43.8
(Official data)
Fondo Inmobiliario Colombia

255.5
Dec-16 Viva Malls Minority Stake (FIC); Fiduciaria Bancolombia SA; Colombia 49.0
(Official data)
Bancolombia SA
108.2
Sep-17 Elevo Group Acquisition NACALA Holdings Sarl Luxembourg 100.0
(Official data)
Perimetral de Oriente de Cundinamarca toll United 60.0

Nov-16 Acquisition InfraRed Capital Partners Ltd 50.0
road project Kingdom (Official data)
Fondo de Inversion Colectiva

Portfolio of 139 properties in Bogota, Medellin 38.7
Dec-16 Acquisition Inmobiliario Inmoval; Credicorp Colombia 100.0
and Villavicencio (Official data)
Capital Colombia SA
Fondo de Inversion Colectiva

32.9
Dec-17 Portfolio of 125 properties Acquisition Inmobiliario Inmoval; Credicorp Colombia 100.0
(Official data)
Capital Colombia SA
May-17 Impregilo Colombia SAS Acquisition Grupo ICT II SAS Colombia n/a 100.0
Innova Capital Partners LLC;

United States;
Dec-16 Erco Energia SAS Minority Stake Fondo de Capital Privado de n/a n/a
Colombia
Emprendimiento e Innovacion SP
Jul-16 Bancol Acquisition Tinsa SA Spain n/a n/a

Source: EMIS DealWatch

M&A Activity, 2016-H1 2018
Number and Value of Deals in Colombia’s Deals by Deal Value, USD

Real Estate and Construction Sector*
0-50mn;
6 > 100mn;
22.2%
33.3%
626.3 2
1
0 0
5.0 50.1-100mn;
11.1%
H1 H2 H1 H2 H1
2016 2017 2018 Undisclosed;
33.3%
Value of Deals, USD mn Number of Deals
Deals by Deal Type Deals by Country of Investor

Luxembourg
10%
Minority United States

Stake 10%
Purchase
33.3%
Spain 10%
Acquisition Colombia
66.7% 60% United
Kingdom
10%
Source: EMIS DealWatch

04
COMPANIES
IN FOCUS

04 COMPANIES IN FOCUS CONTENTS
Constructora
Conconcreto SA
Highlights Income Statement, Consolidated, COP bn

Constructora Conconcreto (Conconcreto), founded
in 1961 by a group of Colombian architects and 21.9%
engineers, is an integrated engineering and
construction group with operations in the
construction of residential, non-residential 16.0%
14.8%
buildings and infrastructure projects.
1,484
1,472
Conconcreto operates in four business segments:
1,216
construction; residential buildings; road

266
concessions and real estate investments; and

235
220
corporate segment. The construction segment
99
93
79
engages in the design, engineering and execution
of infrastructure and building construction 2015 2016 2017
projects for both the public and the private Net Revenues EBITDA
Net Profit EBITDA Margin
sector, as well as in leasing machinery and
equipment. The residential buildings segment
specialises in land acquisition, construction, Balance Sheet, Consolidated, COP bn
operation and sale of housing units in major
cities in Colombia.
2.50
The investment segment comprises investment in
commercial real estate properties managed by 1.69
the private equity fund Pactia, controlled by
Conconcreto (a 46% equity stake), Colombian 0.97
3,235
3,097
3,074
holding company Grupo Argos (36%) and local

pension fund AFP Proteccion (18%), as well as
550
operating road concessions. At end-2017,

1,389
1,331
1,282
399
259
Conconcreto had equity stakes in three highway

concessions: Via 40 Express (at a length of 142km
2015 2016 2017
connecting the cities of Bogota and Girardot),
Total Assets Shareholders' Equity
CCFC (spanning 38km between the cities of Net Debt Net Debt/EBITDA
Bogota and Los Alpes), and Devimed (a length of
296km connecting the cities of Bogota and
Medellin).
Source: Company Data, EMIS Insights

Constructora
Conconcreto SA
(cont’d)
Highlights Net Revenues by Segment, 2017
The corporate segment provides shared services
and internal support for all subsidiaries of the
company. At the end of 2017, Conconcreto had Residential
Buildings
2,991 direct and 26,774 indirect employees. 15.0%
Conconcreto is listed on the Colombia Stock Road

Exchange. Its market capitalisation stood at COP Concessions and
Real Estate
896bn at the end of May 2018. The majority Investments
Construction
shareholders of the company are its founding 68.9% 7.7%
partners led by Colombian entrepreneur Dario
Aristizabal Correa, with a 55% equity stake, and Corporate
Segment
French construction group Vinci SA, with a 20% 8.4%
stake, as of December 2017.
In 2017, Conconcreto’s net revenues rose by 0.8%

y/y to COP 1.5tn. During the year, the value of
executed construction works stood at COP 1.1tn, a
decrease of 11.4% y/y, which was offset by a 12% Backlog, COP bn, year-end
growth in revenues from investments in road
concessions and real estate.
3,133
As of December 2017, Conconcreto’s backlog
2,551
amounted to COP 2.4tn, down 23.6% y/y, 2,395
equivalent to construction works for 24 months. 1,900
Around 67% of the value of the backlog comprised
private sector projects, with the remaining 33%
being public sector projects. Projects in Colombia
accounted for 89% of the value of the backlog,
while 11% corresponded to projects in Central
America and the Andean region. 2014 2015 2016 2017
Source: Company Data

Construcciones
El Condor SA

Construcciones El Condor SA, founded in 1979 by a 37.2%
group of Colombian engineers, specialises in the 32.8%
design, engineering and construction of public
and private projects in the areas of transport,
water, energy and mining infrastructure. The
14.4%
company also acts as an operator and manager
of infrastructure concessions.
1,394
As of December 2017, Construcciones El Condor
899
295
owned a 21.1% equity stake in the road
234
201
629
186
183
149
concessionaire Concesion Aburra Norte (Hatovial),

managing 71km of highways in the department of
Antioquia. Additionally, the company had equity 2015 2016 2017
stakes in seven concessions for construction and Net Revenues EBITDA

operations of highways in Colombia at differing
construction stages: Concesion La Pintada (an
equity stake of 21.2%), Concesion Pacifico Tres Balance Sheet, Consolidated, COP bn
(48%), Concesion Vias del Nus (21.2%), Concesion
Vias de Las Americas (66.7%), Concesion Tunel
2.14
Aburra Oriente (12.5%), Concesion Vial de los
Llanos (11%) and Concesion Ruta al Mar (100%).
Construcciones El Condor also had a wholly- 1.27 1.27

owned subsidiary – Condor Investment USA –
2,707
specialising in the execution of commercial,

2,055
1,958
industrial and infrastructure projects in the US

state of Florida. The company ended 2017 with a
428
375
298
970
total of 3,399 employees.

823
798
Construcciones El Condor is listed on the 2015 2016 2017

Colombia Stock Exchange. Its market Total Assets Shareholders' Equity
capitalisation stood at COP 643bn at the end of Net Debt Net Debt/EBITDA
May 2018.

Construcciones
El Condor SA
(cont’d)
Highlights Backlog, COP bn, year-end
In January 2017, Construcciones El Condor sold its
15% stake in the airport operator Opain to
Colombian holding company Grupo Argos for COP
240bn. Opain operates and maintains the El
Dorado international airport in the city of Bogota.
In December 2017, Construcciones El Condor
3,155
signed an agreement to sell a 50% equity stake in
2,695
2,476
the Ruta Al Mar road concession project to British
1,855
investment manager InfraRed Capital Partners for

an undisclosed sum. Ruta Al Mar holds a 34-year
concession for the design, construction and
operation of a 491km highway connecting the 2014 2015 2016 2017
departments of Antioquia, Cordoba, Sucre and

Bolivar. The project is expected to be completed
by the end of 2020. Following the deal,
Construcciones El Condor retained its remaining Profitability Ratios
50% stake in Ruta Al Mar.
29.9%
In 2017, the net revenues of Construcciones El
Condor reached COP 899bn, an increase of 42.9%
22.6%
y/y, as a result of higher proceeds from the 20.4%
18.6% 18.9%
execution of infrastructure projects. Accordingly,
the EBITDA of the company rose by 26% y/y to
COP 295bn, supported by higher construction 10.7%
9.1%
activity and divestment of the company’s stake in 7.6% 6.8%
Opain early in 2017.
As of December 2017, the company’s backlog

2015 2016 2017
stood at COP 2.5tn – a decrease of 8.1% y/y,
equivalent to 48 months of construction works. Return on Sales, ROS Return on Equity, ROE Return on Assets, ROA
Source: Company Data, EMIS Company Database, EMIS DealWatch

Odinsa SA

Odinsa SA, founded in 1992, specialises in the
construction and administration of infrastructure 71.9%
projects in Latin America and the Caribbean. Its
60.6%
business units include road concessions,
construction of infrastructure projects and airport
concessions.
670
1,486
As of December 2017, the company had equity 31.3%
1,068
stakes in the highway concession Autopistas del
867
851
Cafe, with a total length of 270.2km, connecting
200
193
515
the departments of Caldas and Valle de Cauca, as
271
well as in the concession for the El Dorado

international airport in the city of Bogota. 2015 2016 2017
Outside of Colombia, the company held stakes in Net Revenues EBITDA

the concessions of the Mariscal Sucre
international airport in the city of Quito, Ecuador,
as well as in two highways in the Dominican Balance Sheet, Consolidated, COP bn
Republic – Autopistas del Nordeste (total length
of 107km) and Boulevard Turistico del Atlantico 4.34
(total length of 123.5km).
3.00
As of December 2017, Odinsa also participated in
consortiums in charge of the construction and 1.42
operation of two highways in Colombia: Conexion
5,208
5,130
Pacifico 2, located in the department of Antioquia

with a total length of 98km (delivery date of the
2,983
end of 2020), and Malla Vial de Meta, located in

1,906
1,811
1,545
1,515
1,178
the Meta department with a total length of

974
354km. Moreover, the company had the

2015 2016 2017
concession for the Green Corridor highway in
Aruba, with a total length of 31km, which is Total Assets Shareholders' Equity
Net Debt Net Debt/EBITDA
expected to enter into operation by the end of
2018.
Source: Company Data, EMIS Company Database

Odinsa SA
(cont’d)
Highlights Net Revenues by Segment, 2017

Over the 2016-2017 period, Odinsa carried out a
corporate restructuring through several
divestments of non-core assets, in order to focus
its operations on the road and airport concession
businesses. In the second quarter of 2017, Odinsa Construction
24.3%
divested its 51.2% equity stake in Chilean thermal
power plant Generadora del Pacifico for USD Road
Concessions
44.4mn and a 59.7% stake in Panamanian thermal 75.0%
power plant Generadora del Atlantico for USD
35.3mn. Moreover, in June 2017, Odinsa agreed to
sell its 35.8% stake in the Colombian road Airport
operator Concesion Santa Marta Paraguachon, Concessions
0.7%
which holds the concessions of the Rio Palomino-
Riohacha and Riohacha-Paraguachon highways in
the departments of Magdalena and La Guajira, for
USD 40.4mn.
EBITDA by Segment, 2017
During 2017, Opain – the concessionaire of the El
Dorado international airport in the city of Bogota,
Airport
in which Odinsa has a 35% equity stake – Concessions
completed a COP 420bn investment, which 20.3%
increased the capacity of the airport to 40mn

passengers per year.
In March 2018, Odinsa acquired a 70% stake in a Construction

15.8%
private initiative project to build a new airport in Road
Concessions
the city of Cartagena, Bolivar department. The 62.8%
project, which will be carried out under the
Others 1.1%
public-private partnership model, will demand an
investment of around USD 600mn. The first stage
of the project is expected to be completed by
2025, with the opening of a passenger terminal
with a capacity of 9mn passengers per year.
Source: Company Data, EMIS DealWatch

Cementos Argos SA

Cementos Argos, founded in 1934, is the largest
cement and concrete manufacturer in Colombia.
In December 2017 it was the fifth largest cement 19.2% 19.4%
manufacturer in Latin America and the fourth 17.3%
biggest in the US.
Cementos Argos operates 13 cement plants,
8,517
8,533
7,912
located in Colombia (seven), the US (four),

Honduras (one) and Puerto Rico (one). As of
1,652
1,519
1,479
December 2017, the company had a combined
563
556
production capacity of 23mn tonnes of cement
77
and 18mn m3 of concrete per year.
2015 2016 2017
The company also operates nine grinding
Net Revenues EBITDA (adj.)
facilities, 340 concrete plants, 94 distribution Net Profit EBITDA Margin
centres, 2,600 truck mixers and 33 port terminals,
located in 14 states in the US, Colombia and 13
countries from Central America and the Balance Sheet, Consolidated, COP bn
Caribbean region. The company ended 2017 with a
4.66 4.64
total of 8,547 employees, distributed across
4.16
Colombia (4,228), the US (3,178) and the countries
from Central America and the Caribbean region
(1,141).
Cementos Argos is listed on the Colombia Stock

19,157
18,783
17,447
Exchange. Its market capitalisation stood at COP

12.8tn at the end of May 2018. Its controlling
9,074
8,738
8,779
shareholder is Colombian holding company Grupo

7,085
6,879
6,858
Argos, with a 55.3% equity stake as of December

2017. Grupo Argos controls companies active in 2015 2016 2017
cement production (Cementos Argos), renewable Total Assets Shareholders' Equity
energy generation (Celsia), and road and airport Net Debt Net Debt/EBITDA
concessions (Odinsa).

Cementos Argos SA
(cont’d)
Highlights Cement Sales

In 2017, Cementos Argos sold 16.3mn tonnes of
16.3
cement, up 16.4% y/y. This positive performance
was attributable to a 47.8% growth in sales in the 14.3 14.0
US, as a result of robust demand from the 11.6
12.6
residential and infrastructure construction 16.4%

segments. Sales volumes in Colombia rose at a 13.5%
slower 5.7% y/y, as a result of sluggish domestic
8.6%
demand and price increases, while those in 7.4%
Central America and the Caribbean region grew
by 2.3% y/y, supported by higher sales in
Honduras, Panama and the Dominican Republic. -2.3%
Cementos Argos’ concrete sales dropped by 6.1% 2013 2014 2015 2016 2017
y/y to 10.6mn m3 in 2017. This negative Cement Sales, mn tonnes y/y change
performance was explained by a 6.2% decline in
sales in the US, due to stagnation of the market
in the south-central region and adverse weather Concrete Sales
conditions. Sales in Colombia also decreased by
7.1% y/y, mainly due to a deceleration in
residential building activity. This was partially 11.1
11.5 11.3
10.6
offset by a 4.3% growth in concrete sales in
9.4
Central America and the Caribbean region.
18.1%
In 2017, the net revenues of Cementos Argos
reached COP 8.5tn, up 0.2% y/y, supported by 9.3%
higher revenues in the US and Central American 3.6%
markets, which offset the 12.5% y/y decline in net -2.0%
turnover in Colombia. During the year, the US was -6.1%
the major sales market for the company,
accounting for 53.3% of total net revenues, 2013 2014 2015 2016 2017
followed by Colombia (26.7%), and Central Concrete Sales, mn m3 y/y change

America and the Caribbean region (20%).
Source: Company Data

Manufacturas de
Cemento SA

Manufacturas de Cemento SA (also known as
13.0% 13.2%
Cementos Titan), founded in 1916, specialises in
11.6%
the production, export and import of
prefabricated concrete products, such as beams,
foundations, tubes, sewers and curbs. The
company is listed on the Colombia Stock
68.4
61.6
56.9
Exchange.
7.9
8.0
7.5
As of December 2017, Cementos Titan operated
three production plants – Cota, Girardota and
Soledad. Cota is located in the department of
-1.4
-5.6
-6.4
Cundinamarca and has a monthly production
capacity of 26,000 tonnes of concrete products. 2015 2016 2017
Girardota is located in the department of Net Revenues EBITDA

Antioquia and has a production capacity of 2,500
tonnes per month. Soledad, located in the
department of Atlantico, on the northern border
of Colombia, has a monthly production capacity
Balance Sheet, Consolidated, COP bn
of 2,000 tonnes of concrete products. Cementos
Titan also operates one plant in Lima, Peru, and
one plant in Panama, with monthly production 3.87
capacities of 2,700 and 2,500 tonnes of concrete 3.38
3.26
products, respectively, as of December 2017.
Cementos Titan produces concrete products

168.2
161.7
156.7
within four product groups: sewage systems (e.g.

pipes, culvert boxes, tunnel docks, inspection
89.7
88.7
29.1
wells, sinks, ducts), landscape and public space

27.0
84.3
25.9
architecture (e.g. tiles, curbs, grids, benches),

residential and non-residential buildings (e.g.
prefabricated structures, facades, foundations), 2015 2016 2017
and infrastructure (e.g. beams, panels, barriers, Total Assets Shareholders' Equity
Net Debt Net Debt/EBITDA
downspouts, ducts).

Manufacturas de
Cemento SA
(cont’d)
Highlights Net Revenues in Colombia by Plant, 2017
In 2017, Cementos Titan’s major product was
concrete products for sewage systems, which
accounted for 49.9% of the company’s net
revenues. Its remaining income came from Girardota
18%
products for residential and non-residential
buildings (20.5%), for landscape and public space
architecture (20%), and for infrastructure (9.6%).
In 2017, the company’s sales in Colombia reached

COP 48.6bn, a decrease of 6.8% y/y. In volume Cota 69% Soledad 13%
terms, its concrete products totalled 98,294
tonnes, down 1.7% y/y. This negative performance
was attributable to the overall deceleration of the
Colombian economy and the slow advance of
infrastructure projects in the 4G programme. The
company ended 2017 with a net loss of COP 5.6bn.
In May 2017, the Superintendence of Industry and Profitability Ratios

Commerce (SIC) started an investigation over an
alleged cartel involving Cementos Titan and two
other cement makers, American Pipe and Tubox, -0.9%
-1.6%
which were accused of setting the prices of -2.2%
concrete pipes in Colombia over the 2004-2014 -3.2% -3.5%

period. As of June 2018, the investigation is still
ongoing. -5.6%
-6.3%
In June 2018, Cementos Titan announced it plans
to enter into a voluntary process to restructure
-9.2%
its debts. The decision of the company was -10.0%
explained by the poor financial situation of its
foreign subsidiaries, large short-term debts (COP 2015 2016 2017
11.8bn, as of December 2017) and a potential fine
of up to COP 75bn that could be imposed by SIC Return on Sales, ROS Return on Equity, ROE Return on Assets, ROA
following the conclusion of the investigation.
Source: Company Data, EMIS Company Database, Portafolio

05
REGULATORY
ENVIRONMENT

05 REGULATORY ENVIRONMENT CONTENTS
Government Policy
Regulatory Bodies
The Ministry of Housing, City and Territory is the main regulatory body responsible for executing the
government’s policy for urban development. The Ministry is in charge of guaranteeing access to
potable water, developing sewage systems, and providing technical assistance to environmental
authorities and public-service concessionaires. It is also responsible for the implementation of
government housing programmes and related financing instruments for the acquisition of residential
units, such as the My House Now! and 100% Subsidised Housing programmes. The construction of
transport infrastructure is within the purview of the National Infrastructure Agency (ANI), a body
affiliated to the Ministry of Transport. The agency is in charge of coordination, administration and
evaluation of all concessions for design, construction, maintenance and exploitation of transport
infrastructure in Colombia.
100% Subsidised Housing Programme

In June 2012, the government launched the 100% Subsidised Housing programme (Viviendas 100%
Subsidiadas), with the goal of providing housing units to people living in extreme poverty, displaced
by violence or affected by natural disasters. The first stage of the programme ended in November
2015, with the delivery of 103,809 housing units with an average floor area of 47m2, distributed among
296 residential projects in 205 municipalities across 30 departments. According to the President of
CAMACOL, Sandra Forero Ramirez, the first stage of the programme triggered public investments of
COP 4.4tn and created 120,000 jobs. In November 2016, the government launched the second stage of
the programme with the goal of delivering 30,000 housing units at an investment of COP 900bn. As of
May 2018, the construction of 29,956 housing units under the second stage of the programme had
begun.
My House Now! Housing Programme

In March 2015, the government launched the My House Now! (Mi Casa Ya!) programme, with the goal
of supporting housing acquisition for 130,000 families with a monthly income of up to four minimum
wages (COP 3.1mn in 2018). Households wishing to access the programme need to have a pre-arranged
mortgage loan with a local financial institution for acquisition of a housing unit at a price of between
70 and 135 minimum monthly wages. The programme grants a direct subsidy for the initial instalment
of the loan, together with a subsidy of up to 5pp on the interest rate for the remaining portion of the
loan. In 2018, the subsidy for the first instalment amounted to COP 23.4mn for households earning up
to two minimum wages and to COP 15.6mn for those with incomes of between two and four minimum
wages. As of June 2018, a total of 91,577 housing units were already delivered or in various stages of
construction under the programme.
Source: Ministry of Housing, City and Territory, ANI, CAMACOL, Portafolio, El Tiempo, Central Bank of Colombia

Government Policy
(cont’d)
Interest Rate Subsidies Programme
In 2012, in an effort to promote housing acquisition amongst low-income households, the government
launched the Interest Rate Subsidies programme. Under the programme, households with a monthly
income of up to eight minimum wages and no property can receive an interest-rate subsidy for the
purchase of a new housing unit from the Reserve Fund for the Stabilisation of the Mortgage Portfolio
(FRECH), managed by the Central Bank of Colombia. The programme, commonly known as FRECH II,
covers the acquisition of both priority social housing units (VIP), with prices of up to 70 minimum
monthly wages, and social interest housing units (VIS), with prices of between 70 and 135 minimum
monthly wages. It assumes between 4pp and 5pp of the interest rate payable on the amount of the
loan during the first seven years of the amortisation period. In 2015, the government added a new
version of the programme – FRECH III – offering interest-rate subsidies of 2.5pp for the acquisition of
non-VIS housing units to households, regardless of their income and home ownership. This modality
covers the acquisition of homes with a price of between 135 and 335 minimum monthly wages. In
September 2017, the government raised the maximum price of subsidised non-VIS housing units under
the FRECH III scheme to 435 minimum monthly wages. According to CAMACOL, around 80% of the new
homes offered on the market in 2017 were under the scope of FRECH III. In February 2018, the
government approved a COP 1.2tn budget for interest rate subsidies for 2018 under the Interest Rate
Subsidies and My House Now! programmes, which are expected to benefit 77,670 households. The
government has extended the validity of FRECH II until December 2018, and that of FRECH III until end-
2019. In April 2018, during his presidential campaign, president-elect Ivan Duque pledged to maintain
and potentially expand the scope of government housing progammes during his term.
Execution of Main Housing Programmes

Number of Available
Number of Granted Subsidies
Housing Programme Subsidies Description
2016 2017 2018* 2018 2019
Households with a monthly income of up to four
minimum wages. A direct subsidy for the initial
My House Now! 26,280 31,668 6,917 24,170 42,716
instalment of the loan and an interest rate subsidy
of 4pp (VIS housing unit) to 5pp (VIP housing unit).
Households with a monthly income of up to eight
Interest Rate Subsidies, FRECH II
32,625 27,810 11,406 33,500 - minimum wages. An interest rate subsidy of 4pp
(VIP and VIS housing units)
(VIS housing unit) to 5pp (VIP housing unit).
An interest rate subsidy of 2.5pp for housing units
Interest Rate Subsidies, FRECH III
17,214 19,913 9,637 20,000 20,000 with a price of between 135 and 435 minimum
(non-VIS housing units)
monthly wages.
Total 76,119 79,391 27,960 77,670 62,716
* Until June 6, 2018

Source: Ministry of Housing, City and Territory, CAMACOL

Government Policy
(cont’d)
Fourth Generation Road Concessions Programme (4G)

In February 2013, the National Infrastructure Agency (ANI) launched the Fourth Generation Road
Concessions Programme (4G) with the goal of tackling deficiencies in the country’s transport
infrastructure. The 4G programme will bring about the renovation of 7,000km of highways, and
construction of 1,370km of two-lane highways, 141 tunnels and 1,300 viaducts, triggering private sector
investments of over COP 50tn. The programme is being executed under the public-private partnership
(PPP) model in the form of granting concessions for construction, maintenance and operation of
highways for a period of up to 30 years in competitive bidding auctions organised by ANI. The
auctions were divided into three stages. The first and the second stage included nine road projects
each, with initial capital expenditure of COP 14.7tn and COP 19.7bn, respectively. The third stage
comprises two projects, with a combined value of COP 1.4tn. The 4G programme also envisages the
implementation of ten road infrastructure projects by the private sector, which will demand an
investment of COP 27.2bn.
As of May 2018, ANI had granted the concession of 30 projects, of which 21 were under construction. Of
these, 15 projects had secured the required financing (a total of COP 18tn) from Colombian and foreign
banks, debt funds, bond emissions and the national development bank, Financiera de Desarrollo
Nacional (FDN). According to Dimitri Zaninovich, president of ANI, an additional six to eight projects
are expected to reach financial closure by the end of 2018. ANI estimates that the majority of the
financing for the remaining projects will come from Colombian banks (33%), followed by foreign banks
(25%), the FDN (16%), debt funds (11%), bond emissions (9%) and institutional investors (6%).
Awarded Projects Under the Fourth Generation Road Concession Programme (4G),
May 2018
Private Sector
First Stage Second Stage Third Stage Total
Projects
Number of Projects 9 9 2 10 30
Total Extension, km 1,104 1,780 195 1,978 5,058
Number of Tunnels 10 30 2 14 56
Number of Viaducts 294 312 72 181 859
Capital Expenditure, COP tn, 2016 prices 14.7 19.7 1.4 27.2 63.0
Source: ANI, CCI, La Republica, El Espectador, Fedesarrollo, Semana

Government Policy
(cont’d)
Comments Planned Investment under PMTI, COP tn

In November 2015, the Vice-Presidency of Transport Mode 2015-2025 2026-2035
Colombia and the Ministry of Transport presented
Road 63.43 58.76
the Intermodal Transport Master Plan (PMTI) as
the main guiding document for the development Basic Rail 4.10 6.00
of the country’s transport infrastructure over the Infrastructure Air 15.73 1.13
Network
2015-2035 period. Its main objective is to boost Maritime 0.64 0.64
the competitiveness of the economy by Inland Waterway 3.58 1.22

Total 87.48 67.75
promoting foreign trade and lowering
transportation costs between the main export- Integration
Road 17.19 33.88
commodity producing areas and port terminals. Networks Inland Waterway - 2.16
The PMTI aims to connect the country’s ports in Total 17.19 36.04
the Pacific Ocean and the Caribbean Sea with the Total PMTI 104.67 103.79
Annual Investment 10.47 10.38
18 major cities that account for around 85% of
Annual Investment, %
overall GDP. The plan is expected to require total 1.31% 1.30%
of GDP
public investments of COP 208.5tn over the 2015-
2035 period, or an annual investment of 1.3% of
the country's 2015 GDP. The investment will be Planned Investment under PMTI by
allocated to the construction, expansion and Transport Mode, 2015-2035
maintenance of 199 transport infrastructure
Air 8.1%
projects, of which 153 involve road infrastructure,
31 include airports, eight are inland-waterway Rail 4.8%
transport, five comprise rail infrastructure and
two are maritime ports. The PMTI will be financed Inland
Waterway
by public funds and loans from the national 3.3%
development bank, FDN, local and foreign banks
and institutional investors. As of May 2018, the Road 83.1% Maritime
0.6%
government had concluded the design and
feasibility studies for 19 projects, which will
require COP 10.5tn of investment. According to
the CCI, among the main priorities of the
administration of president-elect Ivan Duque is to
complete the design and feasibility studies for
the remaining projects under the PMTI.
Source: CCI, ANI, Ministry of Transport, INVIAS, Office of the Vice President of Colombia

Government Policy
(cont’d)
Roads for Equity Programme

In May 2015, the government launched the Roads for Equity Programme (Vías para la Equidad), a
public funding programme under the supervision of the National Roads Institute (INVIAS), which aims
to build, improve, pave and renovate 858.7km of the national and secondary road network across 25
departments. The programme consists of 58 projects, which will require an estimated public
investment of over COP 4tn between 2015 and 2019. The projects have high regional importance and
are set to complement the projects of the Fourth Generation Road Concessions programme (4G). The
programme has major socio-economic benefits, creating over 27,000 direct and indirect jobs, according
to INVIAS. As of May 2018, the construction of all projects had been awarded to domestic and foreign
construction companies following a competitive bidding process. The auctions were marked by high
investor interest, as INVIAS received 1,920 bids by 557 companies, of which 506 were from Colombia,
the remainder being from Spain, Mexico, Ecuador, Portugal, Costa Rica, Argentina, Brazil, China, Chile
and Peru. As of May 2018, a total of COP 4.6bn had been invested in the construction and
modernisation of 39 road projects and in the design of five additional projects under the programme.
In 2017, a total of 13 projects in nine departments were delivered, at an investment of COP 744.3bn. The
remaining projects are expected to be completed by the end of 2019.
New Infrastructure Law

In January 2018, the government approved Law 1,882, known as the New Infrastructure Law, to
enhance the public procurement process, increase transparency and improve legal security for both
investors and lenders of infrastructure projects. Among the main amendments of the new law is the
mandatory presentation of separate technical and financial offers of the bidders, which aims to
increase the number of qualified bids. According to the CCI, around 79% of public biddings held in
Colombia end with only one qualified bidder. The new law also introduces typical standards and
documents for all stages of the public procurement process, including the selection of winning
bidders, to ensure equal conditions for all participants and to promote competition. Moreover, it
modifies the regime for PPPs regarding the termination of concession contracts of infrastructure
projects. Under the new regime, in the case of contract termination due to irregularities by the
concessionaire, all lenders providing financing for the project have the right to recover their funds.
Additionally, the concessionaire should pay the agreed penalty for the termination of the contract or
at least 5% of its value. These amendments aim to prevent cases similar to the Ruta del Sol II highway
concession, in which the termination of the contract due to bribery practices by one of the
participants – Brazilian group Odebrecht – led to the cancellation of the contract, which put into
question the repayment of the financing to lenders.
Source: ANI, CCI, Ministry of Transport, INVIAS, Portafolio, El Tiempo, Dinero, Semana, Office of the Vice President of
Colombia, El Colombiano
06
RESIDENTIAL
CONSTRUCTION

06 RESIDENTIAL CONSTRUCTION CONTENTS
Highlights
Overview
The residential construction subsector was not shielded from the deceleration of the overall economy
in 2017. Lower consumer confidence stemming from the sluggish job market and a rise in borrowing
costs against high inflation has slowed the demand for residential real estate, with sales of new
housing units declining by 8.2% y/y. The most affected were homes with a price above 135 minimum
monthly wages, as the active government social housing programmes supported demand for low-end
price housing units. From the supply side, local construction companies faced mounting inventories,
accelerated growth in construction costs and moderation of prices of new residential units, which led
to the postponement of several new projects. As a result, the floor area of new residential building
permits in 2017 dropped for a second consecutive year, by 7.9% y/y.
Drivers and Challenges

A major challenge facing the government is easing the national housing shortage. Although the share
of households with no housing unit in urban areas dropped to 5.2% at end-2017, down from 8.9% in
December 2010, there still remains a deficit of around 565,000 new homes, according to the Ministry
of Housing, City and Territory. Potential for growth stems from the approximately 4.9mn households
living on rent in urban areas at end-2017, as well as from the influx of immigrants from Venezuela in
recent years that have increased demand for affordable housing units. To meet the underserved
demand, the government has launched several social housing programmes, such as My House Now!,
100% Subsidised Housing and the Interest Rate Subsidies programmes. In September 2017, it expanded
the scope of the Interest Rate Subsidies programme to include housing units with a price of up to 435
minimum monthly wages to support acquisition of homes from the medium price segment.
Outlook
According to CAMACOL estimates from April 2018, the residential real estate market will return to
growth in 2018, with an expansion in new housing unit sales by 3.7% y/y. The market will be supported
by both strong demand for VIS housing units, in line with the active government social housing
programmes, and the recovery in sales of mid-price homes. Notably, the government allocated a COP
1.2tn budget purely for interest rate subsidies for 2018, which are expected to benefit 77,670
households. Moreover, the uptick in the Colombian economy, decreasing borrowing costs and the
moderation of the growth in housing unit prices will support buying decisions by both future
homeowners and real estate investors. However, in May 2018, CAMACOL cautioned that a major
prerequisite for the sustainable development of the residential market is the continuation of the
government housing programmes by the administration of president-elect Ivan Duque.
Source: Ministry of Housing, City and Territory, CAMACOL, DANE, El Tiempo, Caracol

Main Events
§ In April 2018, Argentine investment firm Grupo Pegasus entered the residential real estate market
in Colombia with the construction of two assisted living projects, which will require a combined
investment of COP 100bn (USD 35.6mn). The first project is located in the town of Chia,
Cundinamarca department, will have 116 beds for assisted living and 19 independent living
apartments with a total area of 4,700m2, and is expected to begin operations by the end of 2019.
The second project is located in the city of Bogota and will have 126 beds for assisted living and 55
independent living apartments. The initiative is part of Grupo Pegasus’ strategy of creating a
leading company in the segment, following the acquisition of a 75% stake in Caluce, the Colombian
operator of elderly care centres, in April 2018. Grupo Pegasus plans to invest an additional COP
200bn in land acquisition and construction of between five and ten assisted living projects with a
capacity of 1,000 beds in the major cities of Colombia by 2023.
§ In November 2017, the government adopted Decree 2,013, which temporarily extended the validity
period of building permits in urban areas. The measure allowed local construction companies until
December 2019 to request an extension of the validity of granted building permits of up to three
years, up from two years under the previous regime. The measure aims to facilitate the completion
of new residential projects and increase legal security for both homeowners and construction
companies against a backdrop of a decelerating economy and restricted loan financing.
§ In recent years, the deep economic recession in Venezuela has spurred an influx of economic
immigrants to Colombia, creating increased pressure on the residential real estate market in
Colombia, especially in the capital city of Bogota and in the regions close to the border. According
to the latest official data by the Colombian migration authority, as of December 2017 there were
550,000 Venezuelans living in Colombia, an increase of 62% y/y. Of those, 126,000 had legal
permission to stay, including about 69,000 holders of a special permit of permanence (PEP) – a type
of humanitarian visa. Back in July 2017, the Colombian government introduced PEP in an attempt to
legalise the migration status of more than 200,000 Venezuelans living in Colombia with expired
permits of permanence or tourist visas. Holders of PEP are allowed to work and study in Colombia
for up to two years. According to the Colombian migration authority, as of December 2017 around
40% of Venezuelans with legal permission to stay in Colombia lived in Bogota, with the remainder
residing in Medellin (9%), Barranquilla (7%), Cali (4%) and other cities.
Source: Portafolio, La Nota Economica, Reuters, EFE

Number of Residential Building Permits* Floor Area of Residential Building

Permits*
19.9
209,657 209,329 18.2 18.1
192,268
16.2 16.3
175,203 170,341 15.1
19.7%
151,533
8.9% 12.1%
9.9%
-1.8% -0.5%
-8.3% 36,116 -7.9% 3.2
-11.0%
-14.3%
-17.9% -18.6% -17.8%
-19.8%
2012 2013 2014 2015 2016 2017 Jan-Mar 2012 2013 2014 2015 2016 2017 Jan-Mar
2018 2018
Number of Residential Building Permits y/y change Floor Area of Residential Building Permits, mn m2 y/y change
* Data for 88 municipalities of Colombia
Comments
Following a peak in 2015, the floor area of residential building permits in 88 municipalities surveyed
by DANE experienced a downward trend, as a result of the deceleration of the overall economy and
lower consumer confidence stemming from the sluggish job market and a rise in borrowing costs
against a backdrop of high inflation and depreciating national currency. The residential construction
subsector also witnessed an accelerated growth in construction costs, mounting inventories and
moderation of prices of new residential units, which led to the postponement of several new projects.
Although the macroeconomic landscape began to improve in the second half of 2017, the floor area of
residential building permits in 2017 dropped for a second consecutive year, by 7.9% y/y. Social interest
housing (VIS) was the most affected segment, with a 20% decrease in floor area compared to a 3.6%
fall for non-VIS housing. Aside from the lower demand, the segment was hampered by heightened
uncertainty regarding the continuation of the government social housing programme My House Now!,
which expires at end-2019. However, the first signs of recovery of the subsector materialised in early
2018 in line with the uptick in the economy and a reduction in interest rates. Despite a decrease of
14.3% of the total floor area of residential buildings in January-March 2018, the floor area of VIS
housing rose by 24.8% y/y.


(cont’d)
Number of Residential Building Permits Number of Residential Building Permits by

by Department,* 2017 Type*
15,562 200,000
Bogota
12,840
175,000
18,985
Antioquia 101,022
3,402 150,000 126,545
102,896
9,954
Cundinamarca 125,000 100,114
7,287 102,009
8,780 100,000 98,057
Valle del Cauca
3,534
3,679 75,000
Atlantico
4,702
50,000 108,635
4,627 89,372 82,784
Tolima 75,089 68,332
3,302 25,000 53,476 20,785
4,393
Risaralda 0 15,331
3,225
4,943 2012 2013 2014 2015 2016 2017 Jan-Mar
Boyaca 2018
1,188
Social Interest Housing (VIS) Others
4,813 Others
Santander
986
4,100 Social Interest
Narino
597 Housing (VIS)
Number of Residential Building Permits by
Bolivar
2,684 Type,* 2017
1,450
2,377
Quindio
1,745
2,664
Huila
1,211
1,635
Meta
1,972
1,846 Social Interest Others
Caldas 64.7%
1,281 Housing (VIS)
1,351 35.3%
Norte de Santander
1,639
851
Cordoba
1,078
4,813
Others
2,037



(cont’d)
Floor Area of Residential Building Floor Area of Residential Building Permits

Permits by Department,* 2017, thou m2 by Type*
20
1,836
Bogota
793
2,203 16
Antioquia
226
1,036
Cundinamarca 12 11.9 14.9
499 12.9
1,165 11.9 12.0
Valle del Cauca 11.6
242
8
633
Tolima
234
546 4
Risaralda 6.4
196 4.4 5.2 5.0 4.3 3.4 2.2
456 0 1.0
Atlantico
262
2012 2013 2014 2015 2016 2017 Jan-Mar
523 2018
Boyaca
93
537 Others Social Interest Housing (VIS) Others
Santander
68
445 Social Interest
Narino Housing (VIS)
38
Floor Area of Residential Building Permits
364
Bolivar
100
by Type,* 2017
316
Quindio
123
274
Huila
99
210
Meta
120
217 Others 77.1%
Caldas Social Interest
80
Housing (VIS)
143 22.9%
Norte de Santander
88
138
Cordoba
58
563.2
Others
128


FOCUS POINT
Floor Area of Residential Building Permits
by Department,* thou m2, 2017
718 (4.8%) 605 (4%)

Atlantico Santander
2,429 (16.1%)
Antioquia
616 (4.1%)
Boyaca
742 (4.9%)
Risaralda
1,536 (10.2%)
Cundinamarca
483 (3.2%)
Narino
2,630 (17.5%)
Bogota
1,407 (9.3%)
Valle del Cauca
867 (5.8%)
Tolima
3,021 (20.1%)
Others

Residential Construction Activity
Comments Apartment Construction Activity by

Status,* mn m2
In 2017, residential buildings totaling an area of
35.0
12mn m2 were completed in Colombia, down 11.6%
y/y, according to a survey by DANE. The decrease 30.0 2.0 2.5
1.7
was more pronounced in terms of houses (-16.8%) 25.0 1.3 1.7
than apartments (-10.1%), as the active 2.6
20.0
government social housing programmes 16.9 17.6 18.8
14.4 15.4
supported the demand for low-end apartments. 15.0
However, in line with the uptick in the overall 18.8
10.0
economy, completed residential buildings in the
10.5
first quarter of 2018 rose by 26.1% y/y. As of 5.0 10.3 9.8 10.3 9.4
March 2018, buildings with an area of 20.7mn m2 0.0

2.8
were under construction, a five-year high, 2013 2014 2015 2016 2017 Jan-Mar
2018
suggesting that the subsector is reaching a
turning point. Completed Under Construction Suspended or Inactive
Area Under Construction by Project House Construction Activity by Status,*

Status,* Mar 2018 mn m2
9.0
8.0
1.8
7.0
2.2 2.5 2.6
6.0 2.8
New Projects 5.0 2.8
Ongoing 15.0%
4.0 2.4 2.1
Projects 2.6 2.7
83.2% 2.0
3.0
2.0 3.7
3.1 3.0 1.9
2.6 2.5
Restarted 1.0
Projects 0.6
0.0
1.8% 2013 2014 2015 2016 2017 Jan-Mar
2018
Completed Under Construction Suspended or Inactive
Source: DANE

Residential Construction Costs
Comments Residential Construction Costs vs

Consumer Price Index, y/y change
In 2017, for the first time in four years, increases
in residential construction costs exceeded the
overall inflation rate in the country. This was 6.8%
provoked by higher costs for labour (+5.9%) and 5.7%

5.2%
construction materials (+4.4%) – the two largest 4.8%
components of the index calculated by DANE, 4.1%
3.7%
with weights of 29% and 66%, respectively. The 3.2% 3.1%
higher labour costs were related to the rise by 7% 2.5% 2.6%
2.9%
y/y of the minimum wage in Colombia in 2017 and 2.4% 1.9% 1.8%
the increasing formality of the sector. The upward
trend in international steel prices during the year
pushed up costs of construction materials. 2012 2013 2014 2015 2016 2017 Mar-18
Residential Construction Costs Consumer Price Index
Residential Construction Costs by City, Residential Construction Costs by Type,

2017, y/y change y/y change
Armenia 6.4% 6.0% 5.9%

Cali 6.0%
Manizales 5.9% 4.7% 4.8%
4.2% 4.3% 4.4%
Medellin 5.9%
3.9%
Pereira 5.5% 3.6%
Pasto 4.7% 2.7% 2.6% 2.6%
Bogota 4.6% 2.2%
1.8% 1.9%
Cartagena 3.8% 1.6%
1.3%
Bucaramanga 3.5% 1.4% 1.1%
1.0%
Neiva 3.5% 0.5%
Barranquilla 2.7%
2012 2013 2014 2015 2016 2017 Mar-18
Cucuta 2.6%
Santa Marta 2.5% Construction Materials Labour
Popayan 2.5% Machinery and Equipment
Ibague 2.2%
Source: DANE

Comments New Housing Unit Sales*

After a peak in 2016, sales of new housing units
dropped by 8.2% y/y in 2017, to 177,374 units,
189,049 193,258
according to a survey by DANE. This was 173,276 177,374
explained mainly by a decrease in sales of units 152,178
from the mid- and high-end price segments, by 133,858
13.7% 13.9%
10.3% and 19.5% y/y, respectively. On the other 9.1%
hand, the low-end residential market remained
2.2%
relatively stable, with a decline in sales of just 0.6%
42,052
3.6% y/y. In 2017, lower housing demand was -8.2%
observed in 12 out of the 18 surveyed
-16.0%
departments. The downward trend continued in
the first quarter of 2018, again due to an 2012 2013 2014 2015 2016 2017 Jan-Mar
2018
accelerated drop in sales of housing units from
the mid- and high-end segments. New Housing Unit Sales y/y change
New Housing Unit Sales by Price Range*

200,000
30,826 29,779
23,973
28,702
150,000
28,346
60,567 64,877
24,846 58,164
52,584
100,000 53,681
50,357
50,000 91,990 97,656 98,602 95,237 4,349

70,151 13,335
58,655
24,368
0
2012 2013 2014 2015 2016 2017 Jan-Mar 2018
Low-End Segment (Price of up to 135 MMW) Mid-Segment (Price of 135 MMW to 435 MMW) High-End Segment (Price of Above 435 MMW)
* Data for 18 departments of Colombia



(cont’d)
New Housing Unit Sales by Department New Housing Unit Sales by Price Range,
2017
Bogota and 57,798 Mid-Segment
Cundinamarca 68,794 (Price of 135
26,249 MMW to 435
Antioquia MMW) 32.8%
31,950
20,941
Valle del Cauca
22,115
15,980
Atlantico
13,020 Social Interest
Housing, VIS
8,888
Bolivar (Price of up to High-End Segment
6,627
135 MMW) (Price of Above 435
6,520 53.7% MMW) 13.5%
Santander
7,413
6,264
Risaralda
6,628
5,150
Tolima
3,998
4,755
Quindio
5,418 2017
Narino
4,327 2016 New Housing Unit Sales by Price Range,
4,883 2016
3,614
Magdalena
2,896 Mid-Segment
(Price of 135
2,983
Caldas MMW to 435
3,470
MMW) 33.6%
2,726
Huila
2,675
2,615
Norte de Santander
2,979
Social Interest
2,363 Housing, VIS
Cesar
1,862 (Price of up to High-End Segment
135 MMW) (Price of Above 435
2,214
Meta 51.0% MMW) 15.4%
3,537
2,085
Boyaca
2,901
1,902
Cordoba
2,092
Source: CAMACOL

New Housing Unit Prices
Comments New Housing Unit Price vs Consumer

Price Index,* y/y change
After reaching a peak of 11.4% in 2013, the price
growth of new housing units in Colombia started
to decelerate in line with the slowdown of the 11.4%
10.8%
economy, a greater supply of new buildings, and 10.2%
restricted loan financing. However, the increase
7.1% 7.9%
in residential building prices surpassed overall
6.8% 6.8% 6.4%
inflation in the country, both in 2016 and 2017. In 5.7%
terms of building types, prices of new houses 4.1%
3.7%
continued to rise at a higher pace than those of 3.1%
2.4%
apartments, due to more limited supply. In 2017, 1.9%
the highest price increases of new apartments

were recorded in the cities of Cali, Cundinamarca, 2012 2013 2014 2015 2016 2017 Jan-Mar
2018
Medellin and Cartagena.
New Housing Unit Price Consumer Price Index
New Housing Unit Price by City, 2017, New Housing Unit Price by Type,*
y/y change y/y change
13.0%
Cali
7.1% 14.0% 13.7%
10.9%
Cundinamarca
6.6% 11.0% 11.1%
8.9% 9.6% 9.3% 9.4%
Medellin 7.9%
18.4%
7.2% 7.9%
6.2% Apartments 6.8% 6.6% 6.7%
Cartagena
3.3% Houses 6.4%
5.3%
Barranquilla
6.2%
4.7%
Bogota and Soacha
28.5% 2012 2013 2014 2015 2016 2017 Jan-Mar
2018
4.0%
Bucaramanga
-15.1% Apartments Houses

Source: DANE

Mortgage Loans
Comments Outstanding Mortgage Loans

Outstanding mortgage loans in Colombia
amounted to COP 56.2tn at end-2017, an increase 56,156 57,883
of 8.4% y/y, the slowest growth in a decade, as 51,791
46,191
the high-interest-rate environment pushed up the
41,445
borrowing costs of households. The mortgage 36,631
loans used for acquisition of social interest
housing rose by 5.2% y/y, while those for mid- 14.4%
13.1%
12.1%
and high-end residential units increased by 9.7%. 11.5%
9.4%
8.4%
In line with the uptick in economic activity and
the decline in borrowing costs at the beginning of
2018, outstanding mortgage loans rose by 9.4%
y/y, as of March 2018, mainly due to higher 2013 2014 2015 2016 2017 Mar-18
demand for loans for acquisition of VIS housing

(9.9% up y/y). Outstanding Mortgage Loans, COP bn y/y change
Outstanding Mortgage Loans by Type of Residential Unit, COP bn

60,000
50,000
40,000
41,057 41,905
37,438
30,000 33,480
29,836
26,175
20,000
10,000
14,353 15,099 15,979
10,456 11,609 12,711
0
2013 2014 2015 2016 2017 Mar-18
Social Interest Housing (VIS) Others
Source: DANE

FOCUS POINT
Outstanding Mortgage Loans by Department, March 2018, COP bn
2,260 (3.9%)
Atlantico
7,253 (12.5%)
Antioquia
1,342 (2.3%)
Bolivar
3,065 (5.3%)
Santander
1,196 (2.1%)
Risaralda
3,729 (6.4%)
Cundinamarca
1,191 (2.1%)
Meta
4,686 (8.1%)
Valle del Cauca
23,411 (40.4%)
Bogota
1,203 (2.1%)
Tolima
8,547 (14.8%)
Others
Source: DANE

07
NON-RESIDENTIAL
CONSTRUCTION

07 NON-RESIDENTIAL CONSTRUCTION CONTENTS
Highlights
Overview
Non-residential buildings was the construction subsector most affected by the deceleration of the
overall economy in 2017, a decrease in purchasing power of the population stemming from the VAT
rate increase to 19% from January 2017, up from 16%, the sluggish job market and the high-interest
rate environment. During the year, non-residential buildings with a total area of 4.6mn m2 were
completed in Colombia, down 16.4% y/y, with the largest drops being seen for warehouses, trade and
office buildings. An additional negative impact was due to oversupply in the main office markets in
the country – inherited from the investment boom that began in 2014. As a result, demand for new
office buildings continued to fall behind supply in 2017, thus leading to an increase in vacancy rates
and a downward correction in rental prices.

A major challenge facing the non-residential construction subsector is the continued caution of
investors around implementing new projects in a scenario of oversupply. However, the uptick in the
overall economy and exports in the first half of 2018, coupled with waning negative effects from the
VAT rate hike, are likely to raise demand from the consumer-related and logistics industries.
Additional drivers for the office building segment are the ongoing trend of flight-to-quality, as well as
consolidating operations in one single building, mostly in non-central districts, which offers more
attractive prices for both developers and new tenants. Moreover, the rapid development of the city of
Bogota as a major outsourcing hub in Latin America continues to increase demand for new modern
office spaces by local and foreign technology companies and call centre operators.
Outlook
The decrease in floor area of non-residential building permits by 11.5% y/y during 2017 underlines the
sluggish building activity over the course of 2018. The subsector is likely to bottom-out in 2018,
followed by a steady recovery, supported by an uptick in the economy and less political uncertainty
after the election of the business-friendly Ivan Duque as president in June 2018. The subsector will
also be supported by the government’s National Plan for Educational Infrastructure (PNIE), which
aims to invest COP 3.75tn to reduce the deficit in educational infrastructure. An additional positive
impact will come from the enhanced regulatory framework for real estate investment trusts (REITs) in
Colombia, which is expected to attract new investors to the domestic real estate market, thus
balancing demand with supply.
Source: CAMACOL, DANE, Ministry of National Education, Dinero, JLL, Invest in Bogota, EMIS Insights

Main Events
§ In April 2018, the global real estate organisation GRI Club held its annual meeting in the city of
New York, gathering over 320 entrepreneurs and investors in the real estate market in Latin
America. During the event the organisation undertook a survey that showed that about 40% of
participants at the event already had operations in the real estate market in Colombia.
Additionally, around 66% of respondents claimed they were currently expanding or planning to
expand their investments in Colombia, with the most prospective real estate segments being
residential buildings, shopping centres, warehouses and hotels. According to Francisco Paille,
director of the Colombian branch of the US real estate broker RE/MAX, the potential of the
Colombian market is underpinned by the growing population of the country – which will surpass 50
million people in 2018 – as well as controlled inflation and strong interest from large institutional
investors, including REITs, in the local shopping centre segment.
§ In December 2017, the government adopted Decree 2,090, with the goal of promoting the
development of real estate investment trusts (REITs) in Colombia. Under the new regulation, REITs
operating in Colombia can be governed by a professional management team with experience in the
real estate market, but not registered before the Financial Superintendence of Colombia – the
entity in charge of supervising the securities market. Moreover, the decree allowed the listing of
shares of REITs on the Colombia Stock Exchange, thus expanding options for raising and allocating
funds. The measure has the goal of promoting the development of the local capital market,
attracting both new investors and REITs to operate in the real estate market in Colombia, and
increasing investment options for the general population. In an interview with Reuters in August
2017, Juan Pablo Cordoba, president of the Colombia Stock Exchange, remarked that the new real
estate investment funds to be listed on the stock exchange would aim to raise funds mainly for the
construction and acquisition of non-residential buildings, such as shopping centres and office
buildings. Cordoba estimated that these new investment vehicles could raise up to COP 5tn (USD
2bn) from the Colombia Stock Exchange by 2020.
§ In December 2017, Colombian commercial bank Banco Davivienda announced the sale of a portfolio
of real estate assets in Colombia to Fondo de Inversion Colectiva Inmobiliario Inmoval for USD
32.9mn. Under the sale and leaseback agreement, Inmoval received 125 properties, including trade
buildings and branches of the bank. Inmoval is a closed-end fund managed by Colombian
investment firm Credicorp Capital Colombia, with a focus on long-term investments in the real
estate market. The fund had around USD 390mn in real estate assets under management at the
end of 2017.
Source: Dinero, Reuters, El Tiempo, La Republica, Portafolio, EMIS DealWatch

Floor Area of Non-Residential Building Floor Area of Non-Residential Building

Permits* Permits by Type,* 2017
Hotels
7.1 7.1 Office Buidlings 6.7% Industrial Buildings
6.4 9.7% 5.5%
5.7
5.0 28.2% 5.0 Warehouses Hospitals
16.3% 5.0%
10.9% Social
Buildings
0.8% 2.8%
-7.7% Public
-11.5% 0.9 Educational Administration
Buildings Buildings
-20.2% 17.1% 1.7%
-23.3%
2012 2013 2014 2015 2016 2017 Jan-Mar Religious
2018 Buildings
Trade Others 0.7%
Floor Area of Non-Residential Building Permits, mn m2
Buildings 0.5%
y/y change 34.1%
Comments
In 2017, for a second consecutive year, the floor area of non-residential building permits in 88
municipalities in Colombia, surveyed by DANE, declined by 11.5% y/y to 5mn m2. The largest decrease
was observed in permits for office buildings, by 47.6% y/y, as market oversupply, high vacancy rates
and declining rental prices in major cities hampered investor interest towards the segment. The floor
area of trade buildings also dropped by 10.2% y/y, reflecting the deceleration in the overall economy
and the hike in the VAT rate, which postponed expansion plans of several retailers. During the year,
the largest increase in the floor area of building permits was observed in educational buildings, by
28.9% y/y, as a result of the implementation of the government’s National Plan for Educational
Infrastructure (PNIE). It aims to reduce the deficit in educational infrastructure by 60% over the 2015-
2018 period by building 30,693 new classrooms in Colombia, with an investment of COP 3.75tn. As of
September 2017, a total of 5,196 new classrooms had been delivered under the plan, another 9,618 were
under construction, with the remainder expected to be completed or under construction by end-2018.
Another segment with an increase in floor area of building permits in 2017 was warehouses, up 15.7%
y/y, supported by strong demand for logistics buildings in line with the uptick in exports and the rapid
development of e-commerce.
Source: CAMACOL, DANE, Ministry of National Education, Dinero, La Republica


(cont’d)
Floor Area of Non-Residential Building Floor Area of Non-Residential Building

Permits by Type,* thou m2 Permits by Department*, thou m2
979
1,719 Bogota
Trade Buildings 1,674
1,914 756
Antioquia
851
Educational 861 730
Buildings Cundinamarca
668 645
544
Valle del Cauca
821 550
Warehouses
709 269
Atlantico
386
491 236
Bolivar
Office Buidlings 195
937
208
Narino
116
336
Hotels 181
Santander
321 247
176
Boyaca
279 2017 217 2017
Industrial Buildings
408 2016 154 2016
Risaralda
163
250 117
Hospitals Magdalena
58
320
100
Norte de Santander
74
143
Social Buildings 95
125 Meta
63
93
85 Tolima
Public Administration 64
Buildings 221 79
Cordoba
31
36 71
Religious Buildings Cauca
51 70
60
Caldas
24 72
Others 196
26 Others
224


FOCUS POINT
Floor Area of Non-Residential Building Permits
by Department,* thou m2, 2017
268.9 (5.3%)
Atlantico
755.8 (15%)
Antioquia
238.8 (4.7%)
Bolivar
181.2 (3.6%) 176 (3.5%)

Boyaca
Santander
729.7 (14.5%)
544.3 (10.8%) Cundinamarca
Valle del Cauca
979.2 (19.4%)
Bogota
208 (4.1%)
Narino 153.6 (3%)
Risaralda
811.4 (16.1%)
Others

Non-Residential Construction
Activity
Comments Office Building Construction Activity by

Status,* mn m2
In 2017, non-residential buildings totaling an area
4.0
of 4.6mn m2 were completed in Colombia, down
16.4% y/y, according to a survey by DANE. Lower 0.16
0.19
construction activity was observed in all three 3.0
0.19 0.29
major segments: warehouses, with a decrease in
the area of completed new buildings by 34.1% y/y, 2.0 2.18 0.30
0.18 2.33
followed by trade buildings (down 26.4% y/y) and 2.23 1.90
office buildings (-24.1%). The subsector is 1.32 1.79
expected to bottom-out in 2018 and return to 1.0
growth, supported by an uptick in the overall 0.76

1.02
0.78
0.51 0.53
economy and the resumption of investment plans 0.0 0.24
after the election of the business-friendly Ivan 2013 2014 2015 2016 2017 Jan-Mar
2018
Duque as president of Colombia in June 2018.
Completed Under Construction Suspended or Inactive
Warehouse Construction Activity by Trade Building Construction Activity by

Status,* mn m2 Status,* mn m2
2.5 5.0
0.20 0.39
0.31
2.0 0.26 4.0
0.30 0.51 0.42 0.38
1.5 1.00 0.92 3.0 0.44 0.38

0.33 2.60
0.93 0.93 0.51
0.97 2.55 2.40
1.0 2.0 1.36
1.90
2.54
0.94
0.5 1.04 0.90 1.03 1.0
0.83 1.62
0.68 1.27 1.19
0.84 1.04
0.0 0.16 0.0 0.21
2013 2014 2015 2016 2017 Jan-Mar 2013 2014 2015 2016 2017 Jan-Mar
2018 2018
Completed Under Construction Suspended or Inactive Completed Under Construction Suspended or Inactive
Source: DANE

Office Market
Office Building Inventory by City, thou m2
2,591
2,300
2,050
766 718
627
276 219 226 226 215

181 111 101 87
Bogota Medellin Caribbean Region* Cali Bucaramanga
Dec-17 Dec-16 Dec-15
* Includes the cities of Cartagena, Barranquilla and Santa Marta
Comments
As of December 2017, the investment-grade office inventory in the main business districts of the cities
of Bogota, Medellin, Cali, Cartagena, Barranquilla, Santa Marta and Bucaramanga stood at 3.97mn m2,
an increase of 11.4% y/y. The most dynamic office markets in 2017 were in Bogota and the three cities
of the Caribbean region, which witnessed record-high deliveries of new office buildings of 311,000 m2
and 56,000 m2, respectively, marking the peak of a supply boom that began in 2014. However, demand
for office spaces fell well below the new supply in these cities, leading to an increase in vacancy
rates. The office market in the cities of Cali and Bucaramanga has already entered into a correction,
with no new office buildings delivered in 2017, which led to a decrease in vacancy rates. In the
medium-term, relatively high vacancy rates, downward pressures on prices, and intensifying
competition will propel future market adjustments. The US real estate consultancy JLL predicts that
the office inventory in the main business districts of Colombia will expand by an additional 652,000 m2
between December 2017 and December 2019. However, according to the consultancy, several real
estate developers have postponed new projects until after 2019, awaiting demand to absorb the
excess office space, thus improving both vacancy rates and rental prices.
Source: JLL

Office Market
(cont’d)
Comments Office Building New Launches vs Net

Absorption by City, m2, 2017
In 2017, net absorption of office buildings in the
main cities of Colombia reached 278,400m2,
311,000
falling below the new office buildings delivered Bogota
185,000
of 404,000m2, resulting in higher vacancy rates
and a slight decrease in rental prices. During the 56,000
Caribbean Region*
year, the city of Bogota posted a net absorption 26,000
of 185,000m2, due to strong demand for new

37,000 New Launches
office buildings in non-central districts, in line Medellin
46,000 Net Absorption
with the continued trends of flight-to-quality and
consolidating company operations into one office
Bucaramanga
building. The market was supported by high 17,300
demand by both public sector entities and the

0
private sector, mainly technology companies and Cali
4,100
call centre operators.
Office Building Vacancy Rate by City Projected New Office Building Launches
by City by 2019, m2
34.0% 558,000
Caribbean Region*
31.9%
15.9%
Bogota
12.5%
10.1% Dec-17
Medellin
11.0% Dec-16
7.5%
Bucaramanga
22.8%
39,000
21,000 21,000 13,000
3.5%
Cali
5.3% Bogota Caribbean Bucaramanga Medellin Cali
Region*
* Includes the cities of Cartagena, Barranquilla and Santa Marta

Source: JLL

08
INFRASTRUCTURE
CONSTRUCTION

08 INFRASTRUCTURE CONSTRUCTION CONTENTS
Highlights
Overview
In 2017, infrastructure construction was the driving force of Colombia’s construction sector, expanding
its GVA by 7.5% y/y. This was supported by the start of construction of the majority of the
infrastructure projects under the Fourth Generation Road Concessions Programme (4G) and an
advance in the implementation of the Roads for Equity programme. However, the corruption scandal
involving Brazilian construction group Odebrecht and top government officials triggered several
investigations in Colombia, which delayed the beginning of new projects. The 4G projects were the
most affected, as investors and financial institutions postponed financial closures, given the existing
gaps in the local legislation that put into question the repayment of funds granted to infrastructure
projects with cancelled concession contracts. This was the case with Odebrecht’s Ruta del Sol II
highway, whose concession contract was cancelled in October 2017.

One of the main challenges for Colombia is to attract foreign investment in its infrastructure, which
currently poses a serious obstacle to economic development. In the 2017-2018 Global Competitiveness
Report, Colombia was ranked 109th out of 137 countries in terms of quality of overall infrastructure,
while the Ministry of Transport estimated the need for at least COP 210tn of public and private
investment by 2035 purely for the country’s transport infrastructure. A major positive step in this
direction was the adoption of the New Infrastructure Law in January 2018, which introduced typical
standards and documents for all stages of the public procurement process and increased legal
security for both investors and lenders of infrastructure projects. As a result, between January and
May 2018 seven 4G projects managed to achieve financial closure.
Outlook
The outlook for the infrastructure construction subsector remains promising, supported by the
execution of the 4G programme and the enhanced regulatory framework stemming from the New
Infrastructure Law. As of May 2018, 21 of the 30 projects with signed concession contracts were in
various stages of construction. Moreover, 15 projects had already secured the required financing for a
total amount of COP 18tn, of which 58% came from foreign institutions. According to Dimitri
Zaninovich, president of ANI, an additional six to eight projects are set to achieve financial closure by
the end of 2018. Thus, in March 2018, ANI estimated that private investment in transport infrastructure
will reach a record-high of COP 9.1tn in 2018, of which COP 8tn will be allocated in road infrastructure.
An additional push will come from the pledges of president-elect Ivan Duque to preserve the high
public investment in infrastructure adopted in the Intermodal Transport Master Plan (PMTI).
Source: Ministry of Transport, ANI, CCI, Portafolio, Semana, EMIS Insights

Main Events
§ In May 2018, ANI announced that several foreign investors, including three pension funds, ten
private equity funds and various Chinese investors, had expressed interest to invest in
infrastructure projects implemented under the 4G programme. According to ANI, this higher
interest of foreign investors is a result of Colombia joining the OECD at the end of May 2018, which
guarantees that the country complies with best international practices in terms of structuring,
financing and execution of infrastructure projects. This complements the list of foreign investors
that have already pledged to participate in the execution of 4G projects through either loan
financing or equity investments, including the Inter-American Development Bank, US banks
Goldman Sachs and J.P. Morgan, French banks Credit Agricole and Natixis, Japanese peer Sumitomo
Mitsui and Canadian pension fund CDPQ.
§ In April 2018, the World Bank recognised Colombia as the world’s third most competitive country in
terms of regulation for financing infrastructure projects under the PPP model. In the 2018 index,
which assessed the regulatory frameworks of 135 countries on preparation, procurement and
management of PPPs, as well as on management of unsolicited proposals, Colombia scored 83
points out of a possible 100, ranking behind only Australia and the United Kingdom, with 84 points
each. According to the Ministry of Transport, as of June 2018 there were 140 PPPs in Colombia in
several transport infrastructure segments: ports (84), roads (47), airports (seven) and railways (two).
§ In December 2016, Brazilian construction group Odebrecht signed an agreement with the Brazilian
Federal Prosecution Office, the US Department of Justice and the Swiss Office of the Attorney
General, acknowledging that it had paid USD 788mn in bribes over the 2001-2016 period to
government officials in 12 countries in Latin America and Africa (Angola, Argentina, Brazil,
Colombia, the Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru and
Venezuela), in order to secure public works contracts. Odebrecht agreed to pay USD 3.5bn in
penalties to resolve charges in the US, Switzerland and Brazil. The settlement of Odebrecht spurred
bribery inquiries in Colombia and other countries in Latin America. According to the US Department
of Justice, between 2009 and 2014, Odebrecht made USD 11mn in corrupt payments in Colombia to
secure public contracts, including USD 6.5mn for the concession contract for the construction of
the Ruta del Sol II highway, connecting Bogota with the major cities on the Caribbean coast. In
October 2017, ANI cancelled the concession contract. In March 2018, Colombia’s Superior Council of
Fiscal Policy (CONFIS) approved COP 400bn of finance to INVIAS for resumption of the project,
which was renamed Puerto Salgar – San Roque highway. In April 2018, INVIAS launched five public
tenders for the completion of the construction of the highway, which were met with high investor
interest. In July 2018, INVIAS received bids from a total of 136 companies, of which 61 were foreign
entities from Mexico, Spain, Portugal and Ecuador. Moreover, the government aims to hold a new
auction for the concession of the highway in 2020.
Source: ANI, Portafolio, El Tiempo, Semana, El Espectador, Ministry of Transport, Dinero

Quality of Infrastructure
Quality of Overall Infrastructure in Latin Comments

America*
In the 2017-2018 Global Competitiveness Report,
published by the World Economic Forum (WEF),
Chile 4.7
Colombia ranked 109th out of 137 countries in
Panama 4.7 terms of quality of overall infrastructure. In
Ecuador 4.5
regional terms, the country had the second-lowest
score among the members of the Pacific Alliance.
Trinidad and Tobago 4.3 Compared to its 2016-2017 ranking, the country
Jamaica 4.2 climbed four positions, mainly due to
improvements in the quality of road
Mexico 4.1 infrastructure. However, Colombia continued to
Honduras 3.6 experience major deficiencies in road and rail
infrastructure, which increase logistics costs and
Uruguay 3.6
reduce the competitiveness of local products on
Dominican Republic 3.6 international markets.
Nicaragua 3.5
Guatemala 3.4 Quality of Overall Infrastructure in Pacific

Alliance**
Argentina 3.3
El Salvador 3.3 117 115

112 111
108 113
101 110 109
Brazil 3.1 105
Colombia 3.1
Costa Rica 3.1 69 69 71

66 65
Peru 3.1
50 48
45 44
Paraguay 2.6
35
Venezuela 2.5
Haiti 2.0 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
Chile Colombia Mexico Peru
* Score 1-7 (best)

** The higher ranking corresponds to lower quality of overall infrastructure
Source: WEF

Infrastructure Construction Activity
Civil Construction GVA Civil Construction vs Residential and Non-

Residential Construction GVA, y/y
change
15,906 16,189
15,449 15,528 13.0% 13.2%
13,444 13.1%
11,809 6.0% 6.7% 7.5%
5.4%
3.7% 6.4%
29.6%
28.0% 27.8% 27.4%
25.6%
23.9% 23.7%
-3.2%
-5.3%
3,433 -6.4%
-9.2%
-11.0%
2012 2013 2014 2015 2016 2017 Jan-Mar 2012 2013 2014 2015 2016 2017 Jan-Mar
2018 2018
Civil Construction GVA, current prices, COP bn Residential and Non-Residential Construction
Civil Construction GVA, % of Construction GVA Civil Construction
Comments
Over the 2012-2017 period, the GVA of the civil construction subsector expanded at a robust CAGR of
7.2%, outpacing the growth rate in the GVA of residential and non-residential construction (CAGR of
1.3%). This positive development was mainly due to the ambitious government programmes for
development of the national transport infrastructure. In 2017, the GVA of the civil construction
subsector rose by 7.5% y/y, supported by the start of construction works of the majority of the
infrastructure projects included in the Fourth Generation Road Concessions Programme (4G), as well
as by an advance in the implementation of the Roads for Equity progamme. An additional factor was
an increase in public investment in waterways and sanitation systems in remote municipalities.
Nevertheless, in the first quarter of 2018, the upward trend was interrupted. This was mainly due to
the corruption investigations in the country involving Brazilian construction group Odebrecht and top
government officials that have hampered investor confidence and virtually paralysed the financial
closure of 4G projects. Moreover, a ban on signing new public contracts at all government levels in the
four-month period prior to the June 2018 presidential elections, as well as high uncertainty over the
outcome of the presidential race, delayed the beginning of new projects.
Source: CEIC, DANE, Portafolio

Infrastructure Construction Costs
Comments Heavy Civil Construction Costs vs

Consumer Price Index, y/y change
In 2017, for the first time since 2013, increased
heavy civil construction costs exceeded the
overall inflation rate in the country. This was 6.8%
provoked mainly by higher costs for construction 5.7%

materials (+5%) – the largest component of the
4.4%
index calculated by DANE. This was related to an 4.1%
4.1% 3.9%
3.7%
upward trend in international oil and metal prices 3.3% 3.1%
in 2017, which pushed up the costs for the main 2.4%
2.2%
2.1%
construction materials, such as liquid asphalt 1.9% 2.0%
(+35.1%), metal mesh sheets (+22.3%) and steel

sheets (+20.3%). An additional pressure came
from the 5.6% y/y rise in labour costs, stemming 2012 2013 2014 2015 2016 2017 Mar-18
from the upward adjustment of the minimum
wage. Heavy Civil Construction Costs Consumer Price Index
Heavy Civil Construction Costs by Type, Heavy Civil Construction Costs Weights,
y/y change, 2017 2017
Indirect
Costs* 16.4%
Labour Costs 5.6%
Machinery
and
Construction Materials 5.0% Equipment
14.6%
Indirect Costs* 3.3%

Construction
Materials Labour Costs
57.9% 10.8%
Machinery and
2.4%
Equipment
Transportation
Transportation Services 0.4%
2.2%
Services
* Include administrative and contingency costs, and profits

Source: DANE

Investment in Civil Construction

Works
Comments Total Investment in Civil Construction

Works, y/y change
DANE’s index of investment in civil construction
works measures actual disbursements in 12.6%
10.3%
infrastructure works made by public and private 7.8% 7.0%
entities in Colombia. In 2017, investment in civil 5.2%
2.2%
construction works rose by 7% y/y, an increase
compared to the 2.2% growth of 2016.
-7.1%
The main contributor was investment in other
civil works, such as parks, stadiums and other 2012 2013 2014 2015 2016 2017 Jan-Mar
sports facilities, explained by higher public 2018
spending prior to the June 2018 elections. An

Investment in Other Civil Works by
additional positive impact came from the Segment, y/y change
recovery of investment in the oil and mining
41.3%
industries in line with the upward trend in 31.8% 30.1%
international oil and metal prices. 19.2% 17.4%
11.2% 11.5%
0.7% 4.5%
2.7%
On the other hand, actual disbursements in -7.0% -8.7% -10.1%
-17.0%
infrastructure fell across all modalities, 2012 2013 2014 2015 2016 2017 Jan-Mar
negatively affected by corruption investigations 2018
Mining Construction Projects and Pipelines
of public contracts awarded to local and foreign
Other Civil Works*
construction companies.
Investment in Infrastructure by Segment, y/y change
75.7%
36.9%
19.5%
20.0% 9.3% 8.7%
23.1% 16.9% -0.1%
6.2% 8.9% 4.6% -4.3%
-10.2% -1.7% -7.5% -6.8%
-18.1%
-19.5% -20.2%
-43.2%
2012 2013 2014 2015 2016 2017 Jan-Mar 2018
Road Infrastructure Rail, Airport and Urban Mobility Infrastructure Waterways, Water Systems and Port Infrastructure
* Includes parks, stadiums and other sports facilities

Source: DANE

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EMIS Insights - Colombia Real Estate and Construction Sector Report 2018 - 2019

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COLOMBIA

REAL ESTATE &

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CAMACOL Colombian Chamber of Construction

CCI Colombian Chamber of Infrastructure

CONFIS Superior Council of Fiscal Policy

COP Colombian Peso

DANE National Administrative Department of Statistics

DNP National Planning Department

FRECH Reserve Fund for the Stabilisation of the Mortgage Portfolio

GVA Gross Value Added

IDB Inter-American Development Bank

IMF International Monetary Fund

INVIAS National Roads Institute

MMW Minimum Monthly Wage

OECD Organisation for Economic Co-Operation and Development

PMTI Intermodal Transport Master Plan

PNIE National Plan for Educational Infrastructure

PPP Public Private Partnership

REIT Real Estate Investment Trust

SIC Superintendence of Industry and Commerce

VIP Priority Social Interest Housing

VIS Social Interest Housing

WEF World Economic Forum

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02 SECTOR IN FOCUS p.13

03 COMPETITIVE LANDSCAPE p.25

04 COMPANIES IN FOCUS p.31

05 REGULATORY ENVIRONMENT p.42

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No.64 16.5mn m2 30mn m2

Note: Data for 2017.

COLOMBIA REAL ESTATE & CONSTRUCTION SECTOR 2018/2019 6

COLOMBIA REAL ESTATE & CONSTRUCTION SECTOR 2018/2019 7

CONSTRUCTION SECTOR GVA

KEY PLAYERS’ NET INFRASTRUCTURE

Note: Data for 2017.

COLOMBIA REAL ESTATE & CONSTRUCTION SECTOR 2018/2019 8

Sector Snapshot: Colombia

COLOMBIA REAL ESTATE & CONSTRUCTION SECTOR 2018/2019 9

Main Sector Indicators Forecast

Source: BMI Research, ANI, Ministry of Housing, City and Territory

COLOMBIA REAL ESTATE & CONSTRUCTION SECTOR 2018/2019 10

COLOMBIA REAL ESTATE & CONSTRUCTION SECTOR 2018/2019 11

COLOMBIA REAL ESTATE & CONSTRUCTION SECTOR 2018/2019 12

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Main Economic Indicators

2012 2013 2014 2015 2016 2017 2018

a January-March, b May, c January-April

COLOMBIA REAL ESTATE & CONSTRUCTION SECTOR 2018/2019 14

Main Sector Indicators

2012 2013 2014 2015 2016 2017 2018

Construction Sector GVA, constant prices,

Residential and Non-Residential Construction GVA,

Residential and Non-Residential Construction GVA,

Residential and Non-Residential Construction GVA,

Civil Construction GVA, current prices, % of

Support Activities for Building and Civil Construction

Support Activities for Building and Civil Construction