In the past four years, the commercial real estate market in Mexico City has seen significant growth in industrial and office properties. However, this progress hasn't come without its challenges, including zoning. Zoning refers to how different geographic areas within a city or region are divided and classified based on permitted land uses and urban regulations. Think of it as a way to establish different zones in a specific area and define the activities allowed in each zone.

Zoning serves as a tool for urban planning, with the primary goal of organizing and controlling urban development to promote efficient and harmonious land use, prevent conflicts between different activities, and ensure residents' quality of life. Through zoning, rules and restrictions are set to determine what kinds of buildings and activities are allowed in each zone—such as single-family homes, businesses, industries, and green areas.

In the commercial real estate market context, zoning plays a crucial role because it directly affects investment and development opportunities. Investors and developers need to consider zoning regulations when planning the construction or renovation of commercial properties. This provides certainty to investments and prevents potential conflicts arising from improper land use or non-compliant structures. Disregarding zoning regulations could result in fines, project halts, and even the demolition of buildings that don't adhere to the established provisions.

Beyond legal and regulatory considerations, zoning also impacts the economic viability of commercial real estate projects. The location and zoning category of a piece of land or property will determine its income potential and profitability. For instance, an industrial-zoned property might not be suitable for developing a shopping center, and vice versa.

Zoning and Growth in Mexico's Capital

According to SiiLA Market Analytics, the industrial gross leasable area (GLA) in Mexico City experienced a significant 28% growth between the second quarter of 2019 and 2023, surpassing 13.3 million square meters. As Mexico City deals with challenges of population density and limited available land, zoning has become essential to regulate urban expansion, especially for manufacturing, storage, and logistics properties. This helps ensure these properties have the necessary infrastructure and can operate without conflicts with residential or environmentally sensitive areas, as outlined in the General Law of Human Settlements, Territorial Organization, and Urban Development (LGAHOTDU).

On the other hand, we have Mexico City's office spaces. Over the past four years, this real estate sector's GLA grew by 9%, reaching over 8.3 million square meters, mostly of high quality. This reflects a continuous demand for modern and efficient workspaces. To ensure business areas attract companies and professionals while promoting sustainable urban and economic development, the Urban Development Law of the Federal District (LDUDF) sets land use requirements and specific restrictions on urban density, building height, and space allocation.

Zoning also has effects on mixed-use areas. For instance, having offices in a zone can impact traffic, parking, and public services. This requires careful planning and collaboration between developers and local authorities. In this regard, the Delegation Regulations issued by each borough in Mexico City complement state and federal laws and norms, ensuring that local considerations are considered.

Addressing these challenges requires seamless communication among developers, urban planners, and governmental authorities responsible for zoning. Early collaboration helps identify opportunities and obstacles in developing commercial properties, and considering space usage trends and evolving business needs is critical when planning zoning and development. Furthermore, digitization and technology can be valuable tools for managing zoning-related challenges.

For more information on this and other topics, explore SiiLA REsource or contact us at contacto@siila.com.mx.