Mexico’s Construction Costs Climb, Testing Real Estate’s Margins

For developers and investors, the increase isn’t just an accounting figure but a direct squeeze on margins and project timelines—a reminder of how fragile the construction cycle can be. When that pressure isn’t reflected in rental prices, the hit falls squarely on profitability.

According to SiiLA, between the second quarter of 2024 and the same period in 2025, office rents dropped 4% on average—equivalent to -7% in real terms. By contrast, industrial rose 13%, though adjusted for inflation, that gain narrows to 10%. Retail rents edged up 3%, but in real terms held at just 1%. The relationship between costs and rents is uneven: in some segments, inflation can be passed on to tenants; in others, it cuts straight into margins.

Even so, construction cost pressure depends on each input’s weight in a project and doesn’t translate 1:1 into total costs. Cement, for example, is essential in building, but a 6% price hike doesn’t mean the overall budget rises by the same amount. In a hypothetical non-residential project, using typical weightings for materials (50–70% of direct costs) and cement within materials (20–30% in concrete-heavy projects)², the real impact would amount to just 0.6% to 1.3% of total costs.

Disparities also show up across construction segments. In its January report, the National Construction Cost Engineering Center (CEICO) noted that between December 2023 and December 2024, while overall construction costs rose 3.5% year-over-year, industrial plant and warehouse construction barely increased 0.7%, and commercial and service buildings 2.8%. In contrast, housing (3.9%) and public roadworks (4.9%) carried most of the pressure—reflecting the different mix of inputs in each type of project.

At present, there are at least 14 Class A+, A, and B office projects under construction in Mexico City, Guadalajara, and Monterrey, totaling more than 245,000 square meters of gross leasable area, including Espacio Condesa and Punto Aura. More than 160 Class A and B industrial facilities are also underway, set to add over three million square meters to the national inventory across the north, center, and Bajío, plus at least one large shopping center (the expansion of Antara in Mexico City), adding about 46,000 square meters.

Though not a record surge of new supply, cost inflation alone is enough to determine which projects are delivered on time and which are delayed or rethought.

In a market where costs make the difference, the best defense is information. Find more data and analysis on SiiLA REsource or contact us at contacto@siila.com.mx.

***

¹ Between July 2015 and July 2025, annual inflation for INEGI’s general construction index (INPP, base July 2019=100, SCIAN 2013) averaged 5.2%. That places July 2025’s 3.9% rate below the decade-long trend.

² In some non-residential prototypes published by CEICO (CMIC), materials represent between 67% and 78% of direct costs, with cement and concrete accounting for 8% to 20% depending on building type. The illustrative calculation— not a universal coefficient, since each input’s weight varies by system and typology—was obtained by applying broader ranges (50–70% and 20–30%) to the formula: Δ%Total Cost ≈ (%Materials) × (%Cement in Materials) × (Δ%Cement).