Despite the current challenges, the office real estate market in Mexico looks optimistic for 2023 and beyond. While it has yet to fully recover the absorption and delivery levels seen in 2019, before the coronavirus pandemic hit, the office market has gained momentum by adapting to the evolving needs of businesses. This adaptation has been achieved by implementing flexible workspace models, including coworking, and offering pre-build and plug-and-play inventory.

According to Alejandro Delgado, Country Manager Mexico at SiiLA, space absorption has been slower in 2023 compared to 2022. Even though there have been six consecutive quarters of positive net absorption, it still lags behind 2019 levels. However, the slowdown in absorptions this year hasn't negatively impacted the vacancy rate. This is largely due to the limited delivery of new inventory in the past five quarters. It's worth noting that while an average of 130,000 square meters were delivered per quarter in 2019, the quarterly average in 2022 was at most 91,500 square meters.

In the latest SiiLA Market Overview, a quarterly event for clients providing insights and analysis of the commercial real estate market, Delgado mentioned that the national vacancy rate began to decrease in mid-2022. Nevertheless, at certain times, such as the third quarter of this year, the lack of new inventory, combined with absorptions and tenant retention, led to significant reductions. For instance, between the second and third quarters of 2023, the vacancy rate in Mexico's major cities dropped from 21.7% to 20.8%.

Regarding the types of spaces in demand in Mexico, the Country Manager Mexico at SiiLA noted that in 2023, approximately half of the absorptions occurred in pre-build and plug-and-play spaces. This trend coincides with a decrease in new core-and-shell space inventory and the reabsorption of spaces previously adapted by former tenants.

Additionally, Alejandro Delgado pointed out that in the past year, the industries that absorbed the most space included finance, real estate, food, beverages and tobacco, as well as construction. In contrast, the industries that released the most space were legal, water and sanitation, oil and gas, telecommunications, and hospitality and tourism.

Among the notable absorptions in 2023 were BBVA in Monterrey, occupying over 8,600 square meters in Torres Obispado; ISSSTE, taking nearly 7,400 square meters in the Reforma 122 building in Mexico City; and HDI in the Insurgentes 1431 corporate building in Mexico City, involving the absorption of more than 5,900 square meters.

Despite the challenges, Mexico's office real estate market continues to demonstrate remarkable resilience, with dynamism and adaptability that foreshadow a promising future.

For more information on commercial real estate market trends and prospects, access SiiLA Market Analytics or contact us at contacto@siila.com.mx.