How Much More Expensive Is It to Rent Office Space in Mexico City, and How Have Prices Changed?

In the second quarter of 2024, the submarkets of Lomas Palmas, Polanco, and Reforma stood out as the most expensive within the CBD, with rental prices ranging between $24.8 and $28.6 per square meter per month. Outside the CBD, the submarkets of Bosques de las Lomas, Insurgentes, and Periférico Sur maintained the highest prices, with an average range of $22.5 to $23.9.

Over the last three years, these areas have experienced price adjustments. Prices have slightly decreased in Reforma and Lomas Palmas, while Polanco and other high-cost submarkets have shown an upward trend. Overall, variations in these submarkets have been moderate, remaining within a 3% range, either up or down. This relative stability suggests an environment where prices adjust gradually and are controlled, reflecting a balance between supply and demand less susceptible to abrupt changes.

The price evolution in Mexico City’s most expensive submarkets is deeply linked to the interaction between vacancy rates, new inventory deliveries, and absorption levels. In areas like Reforma and Lomas Palmas, vacancy rates of 14.7% and 19%, respectively, have begun to put pressure on prices, causing slight decreases over the last three years. This vacancy reflects a market where supply occasionally exceeds demand, forcing landlords to compete more.

In contrast, Polanco has seen prices rise, driven by a significant volume of new inventory and an increase in gross absorption, meaning the entry of new tenants. Although the vacancy rate in Polanco has grown due to new inventory deliveries, demand has remained strong, absorbing part of this new supply. This positive balance between supply and demand has increased prices, solidifying Polanco as one of the city’s most dynamic and desirable submarkets.

Outside the CBD, submarkets like Insurgentes and Periférico Sur have shown relative price stability, although their dynamics differ. In Insurgentes, net absorption has trended downward, reflecting a slowdown in demand that, coupled with a lack of new inventory, has helped stabilize prices. On the other hand, in Periférico Sur, net absorption has increased, driven by steady demand and a scarcity of new supply, which has allowed prices to remain firm and even experience moderate increases.

In Bosques de las Lomas, net absorption was negative in the second half of 2024, not so much due to a lack of demand but because inventory delivery outpaced the market’s immediate absorption capacity, leading to an increased vacancy rate. Although prices in this submarket have remained on the rise, they could drop if the oversupply persists. This situation illustrates the challenge of balancing inventory growth with existing demand, which may require strategic adjustments by landlords to maintain competitiveness.

Understanding the delicate balance between supply and demand is crucial when analyzing the most expensive submarkets in Mexico City. This balance, sustained by vacancies, absorptions, and new inventory, is a key factor in why prices have remained stable despite internal and external pressures. As the market continues to evolve, the interaction of these factors will be crucial in defining the direction of prices in the coming quarters.

For more information on the performance and development of Mexico´s office market, explore SiiLA REsource or contact us at contacto@siila.com.mx.