Pre-build and Plug & Play spaces are driving the office market in Mexico: SiiLA Market Overview

According to SiiLA's Market Overview results, the Mexican office market has good prospects for 2023 despite a slow start to the year due to a slowdown in absorptions. However, it is expected that in the coming quarters, the occupancy rate will continue to recover, and market prices will remain strong thanks to the availability of Plug & Play and pre-build office spaces.

In the first three months of 2023, the gross absorption in the Mexican office sector reached its lowest level since the second quarter of 2021. This decline in tenant arrivals was more pronounced in the Center and North of the country than in the Bajio region. Despite the slowdown in demand, the office market added four consecutive quarters of positive net absorption, indicating more entries than exits of tenants nationwide. Most exits were due to companies relocating as they grew, meaning the national office market remains stable and attractive to companies seeking expansion.

It is important to note that the Mexican office market is stabilized. Although the average availability rate increased throughout the country during the first quarter of the year due to the delivery of new inventory in a context of low gross absorption, as seen in Monterrey, office occupancy has been growing since mid-2022, and market prices have remained strong even during demand slowdowns. The latter relates to the type and quality of properties currently offered in Mexico.

According to Alejandro Delgado, Country Manager Mexico at SiiLA, market prices were not affected because over half (54%) of rented offices are pre-build and Plug & Play, which have a higher market price compared to Core&Shell spaces. It is important to note that, over the last two years, the market share of Core&Shell spaces nationwide has declined, as in 2020, they represented 60% of the square meters rented, according to SiiLA Market Analytics data.

Another aspect associated with higher market prices is the space's quality. In this regard, Delgado mentioned that in Mexico, higher-quality buildings (A+ and A classes) tend to be larger properties than lower-class properties, so there are more high-end square meters in almost all markets nationwide.

In the coming quarters, an increase in the occupancy rate and a strengthening of market prices in the Mexican office sector is expected. Currently, the market is in a phase of stabilization and growth due to the availability of pre-build and Plug&Play spaces, as well as the quality of properties offered. If you want to learn more about the trends and prospects of the Mexican office market, visit SiiLA or contact us at contacto@siila.com.mx.