Key Trends in Latin America’s Commercial Real Estate Market: The Cases of Brazil and Mexico

The pandemic redefined the use of workspaces, and although the hybrid model has gained traction, demand for premium office spaces in Brazil and Mexico is rebounding as businesses adapt to new workplace dynamics.

In Brazil, the office market, particularly in São Paulo, has begun to stabilize after the pandemic. Market prices returned to nearly $20 per square meter in the second quarter of 2024 after falling to $15 in Q2 2020. Despite this recovery, vacancy rates remain above 20%, indicating that while demand is rising, excess supply remains. This shows that the market is still adjusting.

According to Giancarlo Nicastro, inadequate home working conditions, legal risks, and the rise of hybrid work have driven many companies back to office spaces.

In Mexico, the corporate real estate market continues to show mixed results, especially in Mexico City, where the vacancy rate stands at 21%, and prices remain stable. Giancarlo says factors such as demand for flexible spaces, preference for short-term leases, and a focus on high-quality properties drive the sector's recovery.

Nearshoring and digital commerce have redrawn the industrial landscape in Latin America, with Brazil and Mexico leading this transformation.

The industrial sector in Brazil has experienced sustained growth. Demand for industrial spaces has been robust in the southeastern region, home to 80% of the country's industrial inventory. Low vacancies and high demand are pushing prices up, mainly due to the aggressive expansion of the automotive and pharmaceutical sectors. Despite transportation infrastructure's logistical challenges, companies continue to invest in this sector.

In Mexico, the driving force behind the industrial boom has been companies seeking to move their supply chains closer to the U.S. Border. Cities like Monterrey and Tijuana have seen a surge in demand for industrial properties, reducing vacancies to historic lows and driving up market prices. Sectors such as automotive, manufacturing, and logistics are leading this expansion, positioning Mexico as a strategic hub for nearshoring to North America.

E-commerce has transformed how people shop, but malls in Brazil and Mexico are evolving to stay relevant, becoming true hubs for personalized experiences.

In Brazil, malls have shown a remarkable ability to adapt and remain relevant. Despite Class B and C assets dominating the sector, accounting for nearly 92% of the inventory, vacancy rates have dropped, reflecting a high level of confidence in the sector. This is largely due to the strategic urban locations of malls, which offer complete experiences, combining upscale dining, entertainment, and services that continue to attract consumers.

In Mexico, the retail sector is following a similar path. Diversifying mall formats, particularly community centers, lifestyle centers, and regional malls, which comprise 78% of the inventory, has allowed them to remain relevant by offering comprehensive shopping experiences. These have been reinforced by omnichannel strategies and properties designed to maximize the efficient use of space, adapting to new consumer expectations and the demands of modern commerce.

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