Mexico City Concentrates 77% of Mexican Office Market, but the Future Points Toward Business Decentralization

In the past three years, Mexico's corporate sector has undergone significant transformations, marked by the pandemic and changes in work dynamics. A detailed analysis of the leading national office markets reveals that, while Mexico City and its metropolitan area remain the business and corporate activity epicenter of the country, accounting for 77% of the gross leasable area (GLA) of the sector, there are clear trends toward geographic diversification and growth in emerging markets.

This anticipates a promising outlook in terms of market competition and has important implications. For Mexico City's market, there is a need to innovate and adapt to new work realities, such as the increasing inclusion of flexible office spaces, the gradual rise of remote work, and space conversion for other uses and innovation in services offered to companies and employees. On the other hand, emerging markets have the opportunity and challenge to attract investment and talent, positioning themselves as attractive alternatives for business decentralization.

SiiLA data suggests four trends based on market prices, vacancy rates, market growth, and the average size of properties for office use.

Regarding the evolution of market prices between 2020 and 2023, including maintenance costs, it is observed that there was an increase of 4% in Mexico City. In contrast, Guadalajara, Monterrey, and Queretaro experienced increases of 19%, 22%, and 24%, respectively. Despite the high concentration of offices, the lower price increase in the country's capital (Mexico City) suggests sustained demand and a relatively stable supply, possibly due to the large amount of existing office space and the maturity of this real estate market. On the other hand, the marked growth in other cities indicates greater dynamism and a growing attraction of investments, reflecting the potential of these markets to become alternative business centers. This may result from factors such as lower space saturation, investment incentives, and the development of modern infrastructure that meets the current needs of companies, in addition to potential benefits such as cost reduction and the expansion of other markets, such as the industrial market.

The variation in vacancy rates also provides an interesting perspective on the balance between supply and demand in these markets. The data indicates that, in the last three years, the vacancy rate in Mexico City and Monterrey increased by 35% and 39%, respectively, meaning that the office supply has exceeded demand in a context of economic recovery where larger markets have been more affected by market fluctuations, even due to force majeure causes, such as the pandemic. In contrast, Guadalajara maintained a stable vacancy rate (+3%), indicating a balance between supply and demand, and Queretaro showed a decrease in its rate (-21%), suggesting an increase in demand.

Overall, this variability reflects the different regional dynamics and the adaptation strategies of each city in the face of changes in the work and economic environment. While larger markets face the challenge of managing the surplus of office spaces, smaller markets benefit from increased demand driven by factors such as quality of life, investment policies, and proximity to industrial centers. This landscape suggests that decentralization and geographic diversification could be key trends in the future of Mexico's office market, with significant implications for urban planning, real estate development, and business strategy.