Q3 2024: Small Tenants Drive Growth in Mexico’s Shopping Centers

In Q3 2024, growth in Mexico's retail real estate market was modest, but small tenants like insurance agencies, currency exchanges, foundations, and logistics companies stood out in the country's leading shopping centers. Though occupying just 0.2% of total gross leasable area (GLA) and ranking among the 20 smallest retail sectors, these businesses grew proportionally much more than large tenants, according to SiiLA data.

Why does this matter? Because even as large tenants like clothing stores, convenience shops, and supermarkets dominate in total volume, these small tenants boost the diversity of services in shopping centers and strengthen commercial stability amid market shifts.

This trend takes on particular importance as limited new inventory and a quarterly increase in space absorption—reflecting demand and tenant retention, indicators of sector stability—have reduced vacancy rates for a fourth consecutive quarter, down to 7.3%, the lowest since mid-2020. Absorption has been driven by both large tenants and growing small sectors, which continue to gain relevance in the market.

Specific examples illustrate this trend. In Q3, insurance agencies expanded their occupied area by 5%, while currency exchanges grew by 4%. Among these tenants, Moneytrax took a mini-store of 30 square meters in Magnocentro, Mexico City. Foundations, typically occupying much less space, increased by 60%, with expansions by the Carlos Slim Foundation, which went from a small booth to a storefront over 250 square meters at CETRAM El Rosario in Mexico City. The logistics and transportation sector also showed strong growth, up 9%, with companies like JAPI, which took on 200 square meters in Encuentro Oceanía, State of Mexico.

To better understand this trend, SiiLA REsource segmented retail sectors into four size-based categories, divided into quartiles based on occupied space. This segmentation provides a balanced comparison and shows how each group, from the smallest to the largest, contributes to the sector's dynamism.

For classification, the total space occupied by all tenant sectors was divided into four equal parts or quartiles. Each quartile groups 25% of tenant sectors according to their space. The smallest sectors fall into the bottom 25%, occupying less than 3,000 square meters, while the largest dominate the top 25%, with over 90,000 square meters.

When analyzing proportional growth by category between Q2 and Q3 2024, we found that the smallest sectors showed the largest increase, with growth of 5.3% per square meter already occupied in shopping centers. Meanwhile, mid-lower sectors grew 1.1%, upper-middle sectors grew 0.2%, and the largest sectors registered growth of only 0.6% per square meter. This data shows that while large tenants lead overall volume, small and mid-sized tenants are indispensable to shopping malls' profitability.

This trend suggests that small and mid-sized tenants will continue to play a key role in developing a more versatile and resilient retail offering in Mexico's shopping centers. Their ability to adapt and diversify offerings could be a decisive factor in the evolution of the retail sector, especially in a market where adaptability is as valuable as volume.

For further insights on Mexico's retail market performance and development, explore SiiLA Market Analytics, Latin America's most comprehensive and reliable commercial real estate data platform.