Mexico's Office Market Will Reach Its Highest Growth in 2024 Since 2019

The office real estate market in Mexico is set to experience significant growth in 2024, with more than 220,000 square meters of new office space expected to be delivered in the second half of the year. According to SiiLA data, this figure, combined with over 160,000 square meters delivered in the first half, will mark the highest new additions since 2019, when the new inventory exceeded half a million square meters.

This resurgence in supply comes at a time of temporary demand slowdown. On the one hand, net absorption of spaces—the difference between occupied and vacated space over a specific period—shows signs of recovery, a positive indicator for the future of the market. Although it has been declining throughout the year, the trend is showing signs of improvement. On the other hand, gross absorption, which refers to the total space occupied without considering vacancies, slowed in the first half of 2024 but is trending positively towards the end of the year. This situation is due to a few, but significant, tenant departures and large-scale absorptions in Mexico's main office markets. Consequently, due to moderate absorption levels, limited tenant exits, and a surge in new inventory deliveries, the vacancy rate has slightly increased.

These indicators reflect a complex dynamic in Mexico's office market. The resurgence in supply is a positive sign of confidence in the sector, although absorption rates still face challenges. It will be crucial to observe how new deliveries impact tenant competition, especially in a context of significant demand fluctuations. In this regard, it is important to note that the vacancy rate, close to 21%, suggests there is still room for improving occupancy rates, a potential for positive change. This vacancy rate, while indicating a surplus of office space, also presents an opportunity for investors and stakeholders to negotiate favorable terms and potentially increase their market share. However, with large-scale absorptions and the projected uptick towards the end of the year, we could see a gradual and positive adjustment in the balance between supply and demand.