São Paulo, Mexico City, and Bogotá: Key Trends in LATAM’s Major Office Markets

The office markets in São Paulo, Mexico City, and Bogotá exhibit a shared dynamic that, despite demographic differences, reveals a regional trend toward stability in the supply and demand of office spaces, with a growing preference for flexible leases tailored to new corporate needs.

Accounting for 62% to 77% of their respective countries’ office markets, these three corporate hubs are setting the trends that will shape the future of the work environment in Latin America.

Eduardo Osuna leads BBVA México, one of the most significant tenants in Mexico City. Photo: SiiLA.

By: SiiLA News

08/23/2024

In Latin America, shared realities, such as cultural similarities, economic interdependence, and common business practices, are clearly reflected in the work environment. This is evident in the office real estate market, where, according to data from SiiLA Market Analytics, major business hubs like São Paulo, Mexico City, and Bogotá show similar patterns in occupancy, vacancies, and tenant profiles, revealing a regional dynamic that transcends borders.

Although São Paulo and Mexico City share some socioeconomic and demographic indicators, their population densities differ significantly. São Paulo has a density of 7,500 people per square kilometer and a population of 11.4 million, while Mexico City has a density of 6,100 people per square kilometer and 9.2 million inhabitants.

In contrast, Bogotá has more miniature figures, with a population of 7.4 million and a density of 4,500 people per square kilometer. These demographic differences, according to data from respected institutions such as IBGE (São Paulo), INEGI (Mexico City), and DANE (Bogotá), highlight the particularities of each city within a regional context that, nonetheless, maintains shared patterns in labor dynamics and office usage.

SiiLA’s monitoring confirms this regional connection, showing that despite variations in size and density, São Paulo and Mexico City have similar corporate gross leasable areas (GLA) of 8.8 million square meters each, with comparable vacancy rates of 21.9% and 21%, respectively. Bogotá, with a smaller office stock of 3.1 million square meters, has a lower vacancy rate of 9.6%.

While Bogotá stands out for its smaller size and higher occupancy, all these cities show a gradual trend toward a balance between supply and demand, with stable rental prices in their office markets. These dynamics respond to local needs, with a clear preference for flexible, high-quality spaces. Although the figures vary, a robust market and consistent demand for offices are common characteristics that connect these essential business centers in Latin America, representing between 62% and 77% of the total GLA in their respective countries.

Key Tenants

In Bogotá and São Paulo, demand exceeds new inventory, while in Mexico City, there is a greater balance between supply and demand.

The similarities among the leading office markets in Brazil, Colombia, and Mexico are reflected in the sectors with the highest occupancy rates: real estate, finance, government, business services, and technology.

This landscape reveals a contrast in occupancy preferences: while some sectors, like finance and government, opt for traditional medium- to long-term contracts, others, like technology and especially startups, prefer flexible, short-term renewable models, such as coworking, which allows them to adapt and control operating costs. This diversity of needs requires Latin American office markets to be versatile enough to meet an increasingly diversified demand.

According to SiiLA data, while the financial sector leads office occupancy in São Paulo and Mexico City, representing 21% and 16% of the GLA in Bogotá, government institutions predominate, with 15% of occupancy.

Despite the leadership of specific sectors, the tenant base in these Latin American regions is broad and diverse. In addition to the notable presence of WeWork in all three cities, standout companies include Itaú and Banco Santander in São Paulo; BBVA and the Public Education Secretariat in Mexico City; and Davivienda and Teleperformance in Bogotá.

In the context of corporate dynamism, changes in work habits due to the pandemic, and the reconfiguration of global supply chains in an economically challenging environment, Latin American office markets face a crossroads that redefine their strategic role. These markets must respond to the demand for more flexible contracts and anticipate a regional economic reconfiguration requiring more adaptive and efficient spaces. Therefore, the ability of these urban centers to integrate stability and agility into their real estate offerings will be essential for their sustainability and growth in the medium to long term.

For more information on the performance and development of office markets in Mexico and Latin America, explore SiiLA REsource or contact us at contacto@siila.com.mx.

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