Mexico presents internal strengths that suggest that they will have a positive impact on its real-estate market; however, there are still significant challenges, specifically in the office segment where there has been a slowdown in construction material.
The firm Newmark presented its market updates for this 2023, where it analyzed the real estate situation of 20 markets and real estate subsegments and in which he affirms that a decrease in construction costs is beginning to be detected at a global level.
Regarding Mexico, the report highlighted that being the second largest economy in Latin America, there are positive signs for the real estate market, such as public-private partnerships, a rising economy and greater government initiatives for infrastructure development.
“After experiencing a severe economic recession in 2020 due to the pandemic, the Mexican economy has been on a reassuring recovery path since 2021,” the report read.
The report highlighted the slowdown that has been registered in the office real estate market, especially on the issue of building new spaces. “There has been a slowdown in the corporate office marketparticularly for new interior construction and building from scratch.”
In this context, Newmark highlighted two trends in the office marketwhich have been accentuated since the arrival of the pandemic:
- conversion of office spaces to different uses (medical, schools, recreation).
- Adaptation of existing spaces to meet the requirements of new tenants.
Newmark highlighted construction costs that have risen sharply since the pandemic. “Construction costs have increased year-over-year, since the pandemic. Although labor costs have risen, equipment and materials have had the biggest impact on overall construction costs, with some supplies reaching increases of more than 30% to 40%”.
Other subsegments
Likewise, the Newmark report elaborated that the real-estate market industry has remained stable and, in addition, there has been an increase in demand. “The industrial market is holding steady and we have seen some increase in demand, particularly for warehouse and logistics space.”
In this scenario, the firm highlighted that the vacancy rate of this type of space has decreased, registering 3.3% availability in the third quarter of 2022, which means a historical minimum.
“Currently, development rates are keeping pace with demand, as vacancy rates continue to decline,” Newmark said.
In addition, the firm highlighted the strength of the domestic market and the expansion of the middle class, which, together with the performance of the industrial segment, generates good expectations for the commercial real estate segment.
“The commercial market is projected as an area of opportunity for investment Property due to the incentives created by government reforms and attractive interest rates,” he said.
Costs are smoothed
For Thomas Hundelt, executive general manager of Program and Project Management at Newmark, although globally there has been a considerable increase in construction costs, which has affected activity around the world, there are signs of stabilization.
“Material shortages, fuel surcharges and rising labor costs are slowly stabilizing in many markets, and technology, manufacturing and life sciences companies continue to relocate and expand,” Hundelt said.
