Periferico Sur: the office submarket with highest occupancy in CDMX

The occupancy rate in Mexico City's office market is rebounding from the negative economic effects of the COVID-19 pandemic. Periferico Sur is the submarket that is demonstrating the highest resilience to vacancy within the overall market.

SiiLA Market Analytics reports that the pandemic's most significant impact on Mexico City's office market occurred in Q2 2021. Since then, office vacancies in the capital have risen for nine consecutive quarters. Nevertheless, the market has experienced two consecutive quarters of recovery in its occupancy rate since December of last year, and three consecutive quarters of positive net absorption, with limited new inventory available.

This uptick in occupancy and net absorption indicates that the demand for office space is on the rise, and tenants are either staying put or returning to previously occupied spaces. However, it's worth noting that the restricted delivery of new inventory may be contributing to the recovery of occupancy rates and net absorption, as well as pricing and market competition.

According to SiiLA, the Periferico Sur submarket has had the best occupancy levels during this partial recovery process in Mexico City's office market. As of Q4 2022, Periferico Sur had an occupancy rate of over 88%, the highest rate among all submarkets in Mexico City, where the average occupancy rate is above 78%.

Occupancy rates in a market or submarket of offices should generally fluctuate between 85% and 90% to achieve stability, and the occupancy rate in Periferico Sur remained within this range throughout 2022. The submarket's resilience and recovery are linked to the lack of new inventory offerings beginning in Q2 2022, an increase in gross absorption, and the area's features.

Periferico Sur is home to the Anillo Periferico, one of Mexico City's busiest avenues, making it a hub of significant economic activity with vast road connectivity and various types of properties, including corporate office buildings, businesses, and services. According to Market Analytics’ data, public administration and services institutions, finance and financial companies, as well as insurance companies are among the largest occupants (by square meters) of the Periferico Sur submarket, occupying nearly 40% of the A+, A, and B office square meters.

To find out more about Mexico's commercial real estate market or to obtain insights, visit SiiLA or contact us at contacto@siila.com.mx.