The Resurgence of Retail in Mexico. Occupancy and Absorptions Strengthen Shopping Centers in 2023

Occupancy in shopping centers is steadily rising in Mexico's major retail markets. According to SiiLA, over 131,200 square meters were absorbed during the first six months of 2023, with an occupancy rate reaching 91.5% by the end of the second quarter.

While these absorption rates haven't been as pronounced as those observed last year, when the market rebounded following the slowdown in 2020 and resilience in 2021, the current occupancy levels are approaching pre-pandemic levels. If this trend continues, we can expect further stabilization in the market over the next three years. This development occurs in a context where we anticipate the resurgence of new, innovative retail concepts focused on personalized shopping experiences, which will drive the sector's growth alongside the expansion of online shopping.

In this regard, data from the National Institute of Statistics, Geography, and Informatics (Inegi) indicates that the Consumer Confidence Index (CCI) continues to rise. With seasonally adjusted figures, the CCI increased by 5% during the first eight months of 2023, reaching 46.7 points in August, its highest monthly level since March 2019.

Occupancy and Shopping Centers

Amidst the retail sector strengthening process in Mexico, the occupancy of spaces has been concentrated in specific regions. An analysis of the major cities nationwide reveals that Mexico City and Monterrey accounted for 89% of space absorptions in shopping centers during the first six months of this year. The Aragon and Polanco submarkets stood out in Mexico's capital, while the San Jeronimo - Obispado and Apodaca submarkets led the way in Monterrey. However, four shopping centers absorbed a third of all tenant occupancies.

In Monterrey, Sendero Lincoln reported an absorption of over 11,400 square meters in the first half of 2023, equivalent to 9% of all absorptions. On the other hand, in Mexico City, Miyana recorded an absorption of over 10,000 square meters; Plaza Central, nearly 7,800 square meters; and Centro Santa Fe, over 5,800 square meters. These figures represent 8%, 6%, and 4% of all absorptions during the same period.

It's worth mentioning that Mexico City and Nuevo Leon (the state whose capital is Monterrey) have highly populated metropolitan areas and are two of the three local economies – along with the State of Mexico – with the highest per capita GDP nationally. These regions attract a significant number of residents and visitors, creating a robust market for retailers. The high population density and concentration of economic activity make these locations attractive destinations for investments in shopping centers.

In the past semester, Monterrey and Mexico City absorptions were largely driven by home goods, department, and convenience stores, as well as sectors related to food, beverages, tobacco, textiles, leather, clothing, and health. These businesses accounted for 83% of absorptions in Mexico's major cities during the first half of 2023.

Tracking the gross absorption of properties is crucial for real estate market analysis, as it reveals market trends and provides a solid foundation for property valuation, contractual negotiations, and financial planning for investors and developers.

For more information on this and other topics, explore SiiLA REsource or contact us at contacto@siila.com.mx.