Affordable Chic in Montevideo: How Office Space can make a Perfect Home

Wednesday, September 02, 2009

A view from one “office” apartment, overlooking one of Montevideo’s main plazas

Dear Reader,

Last Wednesday, I told you about a French-style apartment in Montevideo for only $450 a square meter. The apartment had all the trimmings—high ceilings, marble fireplaces, and parquet floors. It was well located, and in good condition. The realtor said it was “ideal for offices”.

But I reckoned it would make a perfect home, and a good opportunity. Stylish residential properties in this area are scarce, and sell for up to $2,000 per square meter.

I’ve seen many large apartments in central areas of Montevideo listed as office spaces. I’m not talking about dark, cluttered commercial spaces that you’d never live in. These are period apartments, with style, original features and elegance, that are simply too large for the local residential market.

Montevideo’s middle class prefers a home in the exclusive Carrasco suburbs. Buyers looking for a city apartment usually want a smaller space. These apartments are also too large for short-term rental.

They do however rent long-term to companies and businesses, with leases of up to five years. One such apartment, 315 square meters, had an asking price of $447,000. Rented as an office for a five-year term, the yearly rent was $28,200 a year. That’s a respectable 6.3% yield—if you paid the full asking price. It’s worth noting that long-term rents in Montevideo bucked the global trend and increased in 2008 by an average 9% according to the National Institute of Statistics.

These larger, formerly-residential apartments are overlooked by the residential market, ending up hidden in commercial office space listings. I don’t expect these apartments to be hidden for much longer. Increasing numbers of expats are relocating to Montevideo, and they prefer bigger, centrally-located apartments with period features…exactly what these “office” apartments offer.

I’ve seen more of these “office” apartments in the Centro district than anywhere else in Montevideo. Centro is Montevideo’s downtown, with plenty of historic buildings. It’s close to the financial and banking districts. The new presidential offices are in Centro. It’s lively at night, with many restaurants and cafes. If you’re looking for peace and tranquility, Centro is not the place for you—although you won’t have to go too far to find a quiet plaza.

I uncovered the secret world of “office” apartments on a scouting trip last year. I asked a realtor to find me properties in Ciudad Vieja. She persuaded me to check out an office overlooking Plaza Independencia. She said there was potential. She was right. The building was beautiful, excellently maintained, and had a uniformed porter. The Canadian embassy occupied one whole floor.

The turn of the century apartment had graceful, classical proportions. It had plaster moldings, stained glass, parquet floors, and decorative tile floors: there was a whole room paneled in wood. It didn’t have a proper kitchen…but at $210,000 for 190 square meters, a kitchen was not a deal breaker.

There was a company interested in renting the space. I calculated an 8% rental yield. I made an offer, thinking I would rent it for a while and perhaps eventually live part of the year in the apartment myself. The seller immediately hiked the price—I guess he thought a foreigner would pay more. I didn’t make a counter-offer. Instead, I asked the realtor to let me know when similar properties came on the market.

The best apartment sold the week before I got here. It never made it to the realtor’s website. Situated on a main plaza, it was a massive 400m2. Owned by the same family for generations, it was in good condition. They used it as a residential space, but ran their business from the apartment too. The asking price was $280,000. That’s $700 a sq m, for a prime location, overlooking a leafy plaza. (The first property at $450 a sq m was not so central, and did not have such nice views). I’m not surprised it sold as soon as it came on the market. Someone got a terrific deal.

If you’ve always dreamed of a Parisian-style apartment, or a spacious retirement home, but couldn’t afford it, these “office” apartments are worth investigating. Don’t take too much time thinking about it though…the good ones don’t stay on the market for long. Contact (JavaScript must be enabled to view this email address) if you are interested in this type of property.

Margaret Summerfield

P.S. If you’re thinking of buying to rent long-term in Uruguay, remember that there are two rental regimes. Properties with a construction permit before June 2nd 1968 are subject to different laws than newer properties (they have a set index for rent increases, for example). For more information on this, contact attorney Juan Fischer of LVM Abogados & Consultores, (JavaScript must be enabled to view this email address).