Why 75% of New Office Spaces Are Entering the Market Vacant in Mexico

Over the past five years, Mexico’s office market has undergone a significant transformation. Before the pandemic, 70% of new office spaces were occupied before hitting the market, but according to data from SiiLA, the situation has shifted dramatically since 2021. Today, three of four new square meters of office space are entering the market without tenants. So, why is this happening?

Between 2020 and 2021, as the pandemic hit the global economy hard, many companies were forced to cut costs. Some closed offices entirely, while others embraced remote or hybrid work models. This led to over 230,000 square meters of office space being vacated during those years. The companies left behind already furnished office spaces, later leased by others looking for spaces requiring minimal setup.

The exodus of companies starting in 2021 drove a notable increase in the proportion of new, furnished office inventory. Before the pandemic, only one-third of spaces entering the market were ready for occupancy. However, this figure rose significantly following the health crisis, reaching 71% in 2023, reflecting a shift in corporate preferences for furnished offices over core & shell.

Despite this increase in furnished offices, as of 2024, three out of four new square meters of office space still enter the market without tenants. This suggests that while demand for flexible, furnished spaces remains, the market faces another challenge beyond oversupply: tenant turnover. As some companies move into these spaces, others vacate, creating constant tenant movement that negatively impacts net office absorption.

In 2024, gross office absorption (the total amount of square meters occupied) has been substantial, and at times, like in the first quarter of the year, it has even outpaced the amount of new inventory added to the market. However, tenant turnover is undermining market stability. While companies are leasing new offices, many others vacate previously rented spaces. As a result, net absorption (the balance between occupied and vacated spaces) remains lower than pre-pandemic levels.

This implies that while demand is recovering, tenant turnover prevents sustained occupancy. Companies seeking flexibility opt for shorter leases, which creates more movement and leaves some newly occupied spaces empty again.