Success or Failure in the Face of E-commerce? 5% of Corporate Space in Mexico is Allocated to Retail Stores

Retail spaces in office buildings are strategic investments that transform the workplace environment and boost property profitability by providing convenient access to goods and services, attracting potential clients, and diversifying revenue streams for property owners and developers.

According to SiiLA, nearly 5% of the gross leasable area (GLA) in corporate buildings in Mexico's major cities is allocated to retail spaces. From cafes like Starbucks to banks and convenience stores like BBVA and OXXO, these spaces range from less than 50 to over 700 square meters.

Retail rents in office buildings are generally lower than in shopping malls but higher than in standalone stores. These spaces are typically occupied by banks, government institutions, and retail stores, especially those related to health, food, and beverages. For instance, Downtown Santa Fe in Mexico City includes nearly 9,000 square meters of retail space in a mixed-use property with over 60,300 square meters of corporate offices. Other significant buildings in Mexico City, such as Torre Mayor by FUNO and Corporativo Polanco by FREL, have a whole commercial floor that serves as an anchor to attract tenants and enhance the experience of those who work or visit these spaces.

The synergy between offices and retail provides mutual benefits. Retailers can benefit from lower rents, tax incentives, and a recurring clientele, while office property owners diversify their revenue streams and create a more appealing work environment for employees. This, in turn, can lead to higher tenant retention rates and ultimately increase property values.

In today's commercial environment, this synergy can be crucial for driving long-term growth and addressing the changing market dynamics. Even the strategy of incorporating retail into corporate buildings fills unused space, especially in Class B and C buildings.

E-Commerce vs. Brick-and-Mortar Retail

On a national level, Queretaro and Guadalajara stand out among the top office markets by GLA, with the highest proportion of retail spaces in corporate buildings at 8% and 6%, respectively. Other cities, like Mexico City (5%) and Monterrey (4%), show lower levels, according to SiiLA data. These differences reflect a combination of office density, quality, tenant types, and the commercial supply in corporate zones.

A prime example of this variability is the prevalence of retail spaces in Class A buildings, which reaches 7% compared to 4% in Class A+ buildings and 3% in Class B buildings. This disparity suggests that Class A buildings, offering an optimal mix of quality and cost, are the most attractive to retailers seeking a recurring clientele and higher returns.

However, in an environment where e-commerce constantly challenges the brick-and-mortar retail model, integrating retail spaces into corporate buildings while providing a more personalized and adaptable approach to employee and floating population needs must deliver a differentiated experience that encourages consumers to visit stores in person.

Currently, over 70% of the Mexican population purchases goods or services online. In this regard, a study by GS1 Mexico indicates that the five most-purchased products in physical stores are food, hygiene and beauty products, household care items, beverages, and pharmaceuticals. In contrast, the five most-purchased products online are fashion and footwear, hygiene and beauty, food, household care items, and pharmaceuticals.

As e-commerce continues to strengthen in Mexico, with an estimated penetration of over 90% in the next five years, retail spaces in office buildings must adapt to new consumer trends to maintain their relevance. This is especially important in a context where the most-purchased products in physical stores are daily necessities for most people. Therefore, these spaces will only be profitable if they offer convenience, quick access to essential products and services, and a personalized approach that can't be replicated online.

For more information on the trends and outlook for Mexico's office and retail real estate market, explore SiiLA REsource or contact us at contacto@siila.com.mx.