Construction labor in Mexico has never been this expensive—at least in nominal terms. According to data from the Mexican Social Security Institute (IMSS), labor costs per square meter rose between 58% and 60% over the past decade for industrial facilities, office buildings, and retail spaces. Over the same period, the construction wage index tracked by INEGI rose 68%.

While both figures seem to describe the same trend, they are not identical. The IMSS calculation reflects the full cost a developer assumes when hiring labor, including taxes, employer contributions, benefits, and administrative expenses. In contrast, the INEGI wage index only tracks wage increases and other direct payments to workers.

This helps explain why wages have risen faster than the total cost of labor: while salaries have steadily increased due to inflation, labor demand, and contract negotiations, other hiring-related expenses have not followed the same pace. Some have risen more moderately, others have remained flat, and changes in fiscal and labor regulations have helped cushion the impact. That gap has so far prevented total labor costs from rising proportionally.

But that gap isn’t endless. If wages continue to grow faster than overall labor costs, another jump in construction costs is only a matter of time.

The impact of these increases is evident. Ten years ago, building an office cost 721.50 pesos per square meter in labor alone. Today, that same square meter costs 1,194 pesos. For industrial buildings, labor costs rose from 661 to 1,094 pesos, and for retail spaces, from 775.50 to 1,285 pesos. While the annual increases may seem moderate, the cumulative effect is clear: in 2025, labor costs are nearly double what they were in 2015.

But if labor has become that much more expensive, have commercial property operating costs risen proportionally? Have landlords been able to pass that burden on to tenants, or have they had to absorb it themselves?

The answer is mixed. A clear example is what happened between 2020 and 2024. During that period, labor costs per square meter in offices, industrial buildings, and retail spaces increased 5.7% annually in each case due to their uniform growth tied to the UMA. Meanwhile, the construction wage index grew at a compound annual rate of 7.1%.

However, rent prices evolved unevenly. According to data from SiiLA, in the industrial sector, asking rents rose at a compound rate of 9.2% per year, while office rents dropped 0.04% and retail increased by just 1.3%. This shows that each market’s specific conditions determine which sectors can pass costs on and which are forced to absorb them, depending on their pricing flexibility and demand elasticity.

In the industrial segment, strong demand driven by nearshoring has made it possible to transfer rising costs without significantly impacting profitability. In the office market, the outlook is more complex: supply continues pressuring demand, limiting rent increases, and forcing landlords to shoulder much of the cost hike. Add to this the exchange rate and inflation, which further erode returns. Conversely, the adjustment has been modest in retail, with a slight recovery, but still not enough to fully offset the rising cost of construction and operations.

But this is not just a Mexican issue. Across the Americas, construction costs have risen—though at different rates. When comparing indices that track total construction costs—including labor, materials, and other operational factors—the differences among the region’s leading economies become clear.

In the United States, the Turner Construction Cost Index shows a 58% increase between 2014 and 2024. In Brazil, the SINAPI Index from IBGE shows a 96% increase in the same period. And in Mexico, the rise was 91%, according to INEGI.

These contrasts show that Mexico is not the only country where building has become more expensive, and they suggest a steady, relatively stable increase over the past decade. Unlike the United States, where costs have followed cycles of sharp increases and moderation linked to supply shocks, inflation, and interest rates, or Brazil, where high inflation and devaluation have caused sudden jumps, Mexico’s cost escalation has followed a smoother trajectory. That apparent stability can be seen as an advantage, as it partly reflects greater labor formalization and improved working conditions. However, it can also be a warning sign: a persistent increase, without adjustments to profit margins, can be just as disruptive—if not more so—than a sudden one. Because even gentle slopes, when they don’t stop, eventually turn into walls, especially when they affect developers’ ability to keep building or landlords’ ability to keep their assets profitable.

To learn more about the trends shaping commercial real estate, visit SiiLA REsource or contact us at contacto@siila.com.mx.