TikTok Reduces a Building's Vacancy in Polanco by Occupying 8,800 m²

TikTok has made a significant mark in the Mexico City office market with one of the most substantial lease transactions of 2024. The company has secured a sprawling 8,800 square meters in Neuchatel Cuadrante Polanco, effectively reducing the building's vacancy rate by a staggering 46%.

This transaction, with its sheer size, is a testament to the rapid growth of Information and Communication Technology (ICT) companies in Mexico City's office market. According to SiiLA, these companies have outpaced the overall tech sector, growing 3.4 times faster. This momentum is driving recovery and reshaping corporate demand in the city.

Efrain Mendicuti is the General Manager of TikTok in Mexico. Photo: SiiLA.

By: SiiLA News

07/23/2024

In just one quarter, TikTok reduced the vacancy rate of the Neuchatel Cuadrante Polanco building from 49% to 26% by occupying nearly 8,800 square meters. This transaction is a clear reflection of the significant impact of tech companies in Mexico City, which now rank as the fifth most significant tenant group by occupancy in the country's largest office market.

The increase in Neuchatel's occupancy comes when the vacancy rate has risen for two consecutive quarters in the nation's capital, following a gradual recovery from the pandemic that began in mid-2022. Currently, the average vacancy rate for corporate buildings in Mexico City is nearly 21%.

It's important to note that the upward trend in the first half of 2024 was due to factors such as a slowdown in absorptions, some significant tenant exits, and a slight uptick in the delivery of new inventory. These factors, along with economic uncertainties like the presidential elections in Mexico and the United States, the emerging global recession, and delays in interest rate cuts, have influenced the real estate market. However, these are localized and temporary situations, and they are expected to pass. Significant absorptions, like TikTok's, drive the office market's recovery, demonstrating its resilience and promising growth potential in Mexico City.

ICT Companies in Mexico City

Neuchatel Cuadrante Polanco is a project that has faced challenges in attracting tenants. Photo: Neuchatel.

ICT companies (Information and Communication Technologies) focus on developing, implementing, and managing digital solutions related to data transfer. Their activities include mobile app creation, web development, hardware and software, cybersecurity, consulting, social networks, and cloud services.

According to SiiLA Market Analytics, approximately eight of ten tech companies renting offices in Mexico City are directly or indirectly involved in ICT. According to consultancy Select, this sector is expected to generate an economic spillover of 517 billion pesos (over 30 billion dollars) in 2024, which is 5.6% more than in 2023.

This economic growth trend in the ICT sector is also reflected in the capital's commercial real estate market. Over the last five years, the ICT sector has absorbed 15% more corporate space and grown 3.4 times faster than the overall tech sector. This growth is not only a testament to the sector's strength but also a significant contributor to Mexico City's overall economic growth.

Currently, ICT companies occupy more than 270,000 square meters of corporate space in Mexico City, equivalent to 4% of the gross leasable area (GLA) in the city's office market. Notable companies with significant GLA occupied include Uber, IBM, Tech Mahindra, and Cisco Systems, which account for just under one-fifth of the ICT sector.

These companies mainly establish themselves in submarkets such as Polanco, Insurgentes, and Santa Fe, which concentrate 63% of the ICT sector's GLA. However, other submarkets like Norte, Reforma, and Lomas Palmas also have a significant tech business presence, representing 33% of the occupancy.

The expansion of ICT companies in strategic real estate markets, as demonstrated by TikTok's recent absorption in Neuchatel Cuadrante Polanco, which reduced the building's vacancy rate by 46%, is a clear testament to the synergy between technology and real estate. This phenomenon catalyzes the office market's recovery and redefines the architecture of corporate demand in Mexico City.

Moreover, these investments reflect a paradigm shift in the context of global economic uncertainty: ICT companies seek space and ecosystems that enhance their innovation and growth. The resilience and adaptability of the capital's real estate sector, driven by technological strength, mark a new era of urban development where technology and physical space converge to create future work environments.

For more information on trends and the office market's performance in Mexico, explore SiiLA REsource or email us at contacto@siila.com.mx.

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