In the heart of the Valley of Mexico, where skyscrapers and luxury offices reflect the region's economic pulse, lies a place seemingly left behind: the "Norte" office submarket. Spanning Tlalnepantla, Naucalpan, and Atizapán in the State of Mexico, this corridor bears the stigma of being the least desirable in the region. With a vacancy rate exceeding 41%, it doubles the national average and poses a troubling paradox: in an area with so much potential, why does no one want to work here?

Local governments in Tlalnepantla, Naucalpan, and Atizapán attribute the decline to structural problems: congested roads, insufficient public transportation, persistent insecurity, and an urban landscape degraded by the haphazard conversion of former industrial zones. Even nine years ago, officials acknowledged the global economy's impact on the region's industrial sector, noting that "some industries that are no longer competitive are shutting down, which reduces secondary sector jobs day by day."

In this landscape of neglect, the disconnect between supply and demand is impossible to ignore. Nearly 90% of Norte's office inventory consists of A+ and A-class spaces, yet their vacancy rates—close to 50% and 38%, respectively—reflect a clear misalignment with market needs. While developers have focused on high-quality properties, demand—primarily from sectors such as finance, technology, and telecommunications—gravitates toward more strategic and competitive submarkets like Polanco and Santa Fe. Local governments themselves recognize these areas as Norte's most direct competitors due to their connectivity, prestige, and concentration of high-level services. Meanwhile, lower-quality buildings, such as B-class spaces, boast much lower vacancy rates—under 14%—thanks to government occupancy, which accounts for 68% of these spaces.

The Norte submarket is caught in a vicious cycle: its lack of competitiveness prevents it from attracting dynamic sectors, which in turn depresses occupancy and drives prices down, further weakening its ability to compete and foster development. Additionally, low absorption rates and tenant departures suggest that the market doesn't view this area as a strategic destination. Can the Valley of Mexico's most underperforming submarket break this cycle and discover a new purpose?

SiiLA data confirms the deterioration. Over the past five years, real estate growth in Norte has slowed significantly, and no significant new inventory has been added in the past two years. Despite this slowdown in supply, gross absorption has followed a downward trend, and ongoing tenant departures resulted in negative net absorption at the start of this year. Meanwhile, market prices have fallen by 6% since 2023 and now average 15% below Mexico City's rates, highlighting not just structural stagnation but also a loss of attractiveness and profitability.

Even so, resilience can emerge in unexpected places. The conversion of office buildings into storage spaces has begun to create value in areas once defined by neglect.

"In some cases, occupancy rates have risen from 10% to 50% after converting offices into warehouses or document storage facilities," says a SiiLA market researcher. One example is Torre Mirax, which now houses Asian tenants who have transformed the space into a strategic storage hub. A similar transformation can be seen at Corporativo Las Américas, just a few blocks away, where conversion efforts have revitalized a previously underutilized property.

These transformations are not just immediate solutions to occupancy challenges but also a sign that the Norte submarket has the potential to reinvent itself. Local governments have identified improving connectivity, public transportation, and security as essential steps toward revitalizing the area. Projects to rehabilitate roads and strengthen transportation corridors could be critical to attracting investment. Additionally, offering tax incentives to businesses interested in occupying or developing spaces could help break the cycle of stagnation.

Beyond these initiatives, the submarket could leverage its strategic location within the Valley of Mexico to focus on specific activities, such as logistics hubs, distribution centers, or hybrid spaces combining storage and office use. Conversion projects have already proven to be an effective way to generate value from underutilized properties. However, for Norte to reclaim its relevance, it will need to adopt an approach that addresses current demands and envisions a long-term future.

The real challenge lies in reshaping Norte's reputation as a lagging submarket and turning it into an attractive destination for businesses and developers. Can the Valley of Mexico's most overlooked submarket redefine itself and regain a place on the business map? Only time—and concrete actions—will tell.

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