On April 20th, Alejandro Delgado, SiiLA’s Country Manager Mexico, presented the Market Overview for the first quarter of 2023. SiiLA publishes an exclusive quarterly report for its clients detailing the trends in Mexico's commercial real estate sector. On this occasion, Delgado stated that the market is currently in a state of recovery. On the one hand, the office and retail sectors are expected to become more dynamic in 2023. And on the other hand, a more pronounced investment in industrial assets is anticipated, mainly due to the boost from nearshoring to Mexico.

More office occupancy

The national office sector has experienced four consecutive quarters of positive net absorption. Although the average availability rate increased throughout the country during the first quarter of this year, market prices remained unaffected. This is because currently, more than 54% of the rented offices are pre-built and plug & play spaces, which are more expensive than core & shell spaces. It is essential to note that the market share of core & shell spaces has been declining. According to data from SiiLA Market Analytics, in 2020, this kind of space represented 60% of the rented square meters.

Overall, the first quarter of 2023 was sluggish for the national office market. However, there were standout markets, including Mexico City, Monterrey, and Guadalajara. The first market had an increasing occupancy rate and a stable market price. In the second market, there was a significant addition of new inventory, such as 7,200 square meters of the Puntacero building. In the third market, it was noteworthy that there was never negative net absorption after the pandemic, and it has been increasing, breaking records in 2022. 

The industrial sector will grow 

The industrial sector in Mexico has shown a marked dynamism, with high levels of absorption and tenant relocation due to their need for expansion. This segment has observed historically low rates in availability, with an occupancy rate of over 98% and double-digit growth in the average price per square meter. Although the delivery of new inventory slowed down in the first quarter of 2023, there is still high demand for spaces in this sector.

In the last three months, Mexico's North and Bajio regions have shown promising performance. Monterrey stood out as the market with the highest gross absorption in the country, with significant investments –such as Tesla's gigafactory in Santa Catarina– driving development in the region, especially in the Ramos Arizpe-Saltillo logistics corridor. Tijuana has also maintained high occupancy levels in the country, with almost no difference between starting and closing prices due to the high competitiveness in all its submarkets.

In Mexico's Bajio and Central regions, three markets stood out. Guadalajara had more net absorption than new inventory due to the arrival of manufacturing and logistics companies. In Mexico City, the Zumpango area had the most inventory under construction, thanks to a new international airport (AIFA) that made it more attractive. Likewise, Queretaro is growing –along with Mexico City– as one of the country's most important commercial corridors for logistics and transportation industries.

The retail sector grows stronger

Mexico's retail sector shows signs of a partial recovery after the pandemic. In the leading national markets –including Mexico City, Monterrey, and Guadalajara– there has been a downward trend in availability, an incipient reactivation of new deliveries, and greater dynamism in absorptions, indicating that the retail sector is regaining ground.

In Mexico City, Home Depot's expansion in the mixed-use building Miyana in Polanco delivered over 5,000 square meters. This region saw positive net absorption, primarily driven by pre-leased space delivery. Occupancy, currently at 91%, is expected to increase throughout this year.

Conversely, Monterrey started off slowly in the first quarter of this year. Although no new inventory has been incorporated in recent quarters, two properties are currently under construction: Alaia Cumbres City Center and Paseo Cumbres. These properties will add approximately 60,000 square meters of space starting in 2023. Since last year, this market has registered positive net absorption and has an occupancy rate close to 90%.

Regarding the Guadalajara market, SiiLA Market Analytics data indicate a gross and net absorption recovery. However, there is little dynamism in new deliveries, and projects are concentrated in the Zapopan corridor. Availability in the region is nevertheless expected to continue decreasing throughout 2023.

SiiLA's Market Overview is a quarterly event exclusively for clients, which presents the latest data, analysis and trends in the office, industrial and retail segments nationwide. To learn more and gain access, please contact us at hola@siila.com.mx.