Mexico’s Office and Residential Sectors Ready for 2020
December 4, 2019Real Estate
The winds of change are blowing throughout Latin America, bringing uncertainty, political changes, and volatility into the market. GRI Residential & Offices Mexico 2019 gathered more than 130 of the country’s most important investors and real estate players to understand what 2020 will bring. Sessions were led by investors and developers such as, Jorge Margain (Ivanhoé Cambridge), Gonzalo Robina (Fibra Uno), Rodrigo Díaz Álvarez (Acciona), Ricardo Zuniga Massieu (Vertex), Roberto Pulido (Mira), Victor Manuel Requejo (Banco Inmobiliario Mexicano), Raúl Gallegos (Credit Suisse), among others.
To get a better perspective of what is going on around the world and where the uncertainty derives from, Grupo Financiero Banorte’s IRO and Chief Economist, Gabriel Casillas, had a clear message for real estate players: geopolitical risks are here to stay. He gave participants a glimpse of the geopolitical and economic risks impacting not only Mexico, but Latin America, and how they will shape 2020. Casillas shared with members that Banorte forecasts a 1.4 percent growth in GDP during 2020. But to ensure that investors stay in Mexico, it is vital that ratings do not drop under the grade of investment.
During another session, investors shared their perspective of how Mexico has changed during the first year of President Lopez Obrador’s administration. Lyman Daniels, President of CBRE Mexico initiated the session asking: what is keeping investors up at night? And just as Casillas had previously presented, a possible downgrade continues to be investors’ main worry. There was also a concurrence that national players are far more uncertain about the Mexican market, which could be generating negative signals to other investors. The main risks that continue to impact investment in Mexico are a need to reinforce the rule of law and improve national security, factors that have impacted real estate activity directly in the last few years.
The Mexican residential sector has experienced some turbulence as sales have decreased in the last year, but local developers are adapting to the new rules of the game, particularly in secondary cities. Developers with experience in Guadalajara, Monterrey and the Bajio region discussed how they are adapting their projects to the needs of each city. For instance, in some secondary cities, hyper-segmented products have performed well and there are people willing to buy, however co-chairs ask developers to take heed in the types of projects they are creating, and to start building more housing developments with end-users in mind, and not for investors.
Mexico is continuing to embrace the mixed-use trend and participants still see great growth potential. But although the market has evolved, developers and investors continue to make mistakes when it comes to master plans and operations. Co-chairs discussed the different ways mixed-use projects could add even more value per square meter through the diversification of spaces, but keeping in mind the issues that could arise when the project is actually up and running with different types of tenants. The devil is in the details and defining how the spaces will co-exist throughout the years will increase the rentability and attractiveness of mixed-use projects.
To get a better perspective of what is going on around the world and where the uncertainty derives from, Grupo Financiero Banorte’s IRO and Chief Economist, Gabriel Casillas, had a clear message for real estate players: geopolitical risks are here to stay. He gave participants a glimpse of the geopolitical and economic risks impacting not only Mexico, but Latin America, and how they will shape 2020. Casillas shared with members that Banorte forecasts a 1.4 percent growth in GDP during 2020. But to ensure that investors stay in Mexico, it is vital that ratings do not drop under the grade of investment.
During another session, investors shared their perspective of how Mexico has changed during the first year of President Lopez Obrador’s administration. Lyman Daniels, President of CBRE Mexico initiated the session asking: what is keeping investors up at night? And just as Casillas had previously presented, a possible downgrade continues to be investors’ main worry. There was also a concurrence that national players are far more uncertain about the Mexican market, which could be generating negative signals to other investors. The main risks that continue to impact investment in Mexico are a need to reinforce the rule of law and improve national security, factors that have impacted real estate activity directly in the last few years.
Mexico’s Residential and Office Opportunities
With a glimpse into the future, members and participants entered specific residential and office discussions. When it came to new challenges players are encountering to develop large office projects, they discussed that investors still have ample appetite for the Mexican market, but they are very selective in the types of assets and the locations. Players believe that the Mexico City market remains solid and that the current surplus of spaces will not have an entirely negative impact, especially since they feel comfortable buying in US dollars at preferential rates that in other markets they could not.The Mexican residential sector has experienced some turbulence as sales have decreased in the last year, but local developers are adapting to the new rules of the game, particularly in secondary cities. Developers with experience in Guadalajara, Monterrey and the Bajio region discussed how they are adapting their projects to the needs of each city. For instance, in some secondary cities, hyper-segmented products have performed well and there are people willing to buy, however co-chairs ask developers to take heed in the types of projects they are creating, and to start building more housing developments with end-users in mind, and not for investors.
Mexico is continuing to embrace the mixed-use trend and participants still see great growth potential. But although the market has evolved, developers and investors continue to make mistakes when it comes to master plans and operations. Co-chairs discussed the different ways mixed-use projects could add even more value per square meter through the diversification of spaces, but keeping in mind the issues that could arise when the project is actually up and running with different types of tenants. The devil is in the details and defining how the spaces will co-exist throughout the years will increase the rentability and attractiveness of mixed-use projects.
