In Mexico, Vacated Offices Remain Unoccupied for Almost a Year

In major office markets across Mexico, vacated spaces have remained empty for an average of three quarters. Although this vacancy period is significant and indicates a slow market reabsorption, it is 29% less than the average time all spaces have been vacant since SiiLA began its monitoring in 2018, including those now occupied. This suggests a gradual market recovery, possibly influenced by adjustments in leasing strategies and increased adaptability to post-pandemic labor market demands.

This occurs in a context where, despite a slight increase (4%) during the first quarter of 2024, the office market's vacancy rate has been trending downward since the second quarter of 2022, still not reaching pre-2020 levels. The current rate is around 21%.

The "Exposure Time" of the vacated inventory measures the number of quarters during which currently unoccupied spaces have been available on the market. This metric is crucial for assessing property demand and attractiveness, providing insights into tenant turnover dynamics, and measuring space occupancy efficiency. With this in mind, it is essential to note that each market has its peculiarities.

Queretaro, Mexico City, Monterrey, and Guadalajara have average exposure times of 3.5, 3.1, 2.7, and 2.2 quarters, respectively. This means that currently unoccupied spaces have been vacated between six months and nearly a year.

In Mexico City, basements and lower floors tend to remain vacant for longer periods, reaching up to seven quarters (almost two years) without tenants. This pattern suggests that lower floors face significant challenges in attracting tenants due to disadvantages in land use and a lack of visibility and accessibility compared to more exposed locations.

In Monterrey, unlike Mexico City, there is more notable variability in the exposure times of office spaces, which range from periods shorter than a quarter to more than twelve quarters (three years). This trend reflects the heterogeneity of the city's real estate market, where some buildings or specific locations may face particular challenges in attracting tenants, possibly due to building characteristics or fluctuations in local demand.

In Guadalajara, like in Monterrey, the exposure times of office spaces vary considerably, ranging from short periods to a maximum of eight quarters (two years). These extremes might indicate specific characteristics of the spaces or buildings that decrease their appeal, underlining the need for improvements or adjustments in leasing terms. However, due to the particular characteristics of this market, which has less dynamism and volume than Monterrey or Mexico City, the diversity in exposure times reflects both the challenges and the growth of the local real estate sector. Factors such as location, specific property features, and local market conditions are decisive in how quickly spaces are occupied. This reality highlights the importance of developing marketing strategies tailored to the particularities of each space to enhance their appeal and shorten vacancy periods.

Finally, in Queretaro, the data reflect a trend where higher floors show better occupancy rates than lower and middle floors. However, unlike Mexico City, this market has more marked contrasts, as exposure times can reach up to 19 quarters (nearly five years). This extensive variability and prolonged exposure times suggest significant challenges in placing specific spaces, possibly due to unfavorable locations or inadequate property features, requiring special attention to improve occupancy.

The differences and similarities in the exposure times of office markets in Mexico highlight how specific regional factors and general economic conditions affect the absorption of office spaces, underscoring the need to adapt real estate strategies to each local context in response to changing labor and corporate market trends.

For more information on trends in Mexico's commercial real estate market, explore SiiLA REsource or contact us at contacto@siila.com.mx.