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Mexico Real Estate Report Q4 2010
Business Monitor International, Aug 2010, Pages: 62
The Mexico Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Mexico's Real Estate industry.
In each of the countries where the Real Estate sectors are reviewed by BMI, we conducted interviews with out in-country sources at the beginning of 2010 and again in the middle of the year. In some cases, the later interviews have given us a large amount of new information that has caused us to rethink our interpretation of what is happening in the Real Estate sector in 2010 and/or to review our forecasts. Mexico is not such a country. Our interviews have confirmed that – across all four cities and three subsectors for which we collected data – the fortunes of market participants are currently near the nadir. Rents have remained remarkably stable in the face of the downturn in the US economy following the global financial crisis of late 2008. The implication is that Mexican property developers have done a surprisingly good job at matching new supply of real estate with demand.
Looking forward, though, we continue to believe that any improvement in conditions for the economy in general or the commercial Real Estate sector in particular will be gradual. The exposure of Mexico’s economy to trade with the US means that the recovery through 2010-14 is fragile. In particular, we see no sign of an upturn in investment. Nor do we see evidence of a sustainable recovery in consumer spending. The risks are to the downside. Nevertheless, the various protagonists in Mexico’s diverse markets for commercial real estate have lived with the challenges of fluctuating growth in the US and changing perceptions of risk within Mexico for a long time.
For the time being, we remain optimistic that protagonists will continue astutely to balance supply and demand over the next five years. Consequently, our base case is that yields will remain broadly unchanged over the next five years or so. However, there is a risk that yields slip sharply – in at least one of the sub-sectors or cities for which we have data – as a result of a slide in rents relative to capital values.
Key Features Of This Report
This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. The questions that we seek to answer for each country remain as follows: What are the main issues for actors in and around real estate development in the country concerned, over both the long and the short term? What are the main constraints that they face? What are the key insights to be gleaned by comparing the real estate sector of a country with its regional peers?
In Q3 we introduced a very substantial improvement to our reports. We incorporated data and qualitative observations provided to us by commercial real estate agents operating in the countries we survey. As a result we have gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors – office, retail and industrial. We have also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology section of this report.
In Q4, we have incorporated a lot of new data in relation to rents and yields in 2010. We gained this data through a new round of interviews with our in-country sources in mid-2010. In some cases, the latest information from our sources has caused us to make significant revisions to our forecasts for 2011-2014. We asked our sources to indicate what growth in rents is likely for 2011. We explain their answers in the Forecast Scenarios.
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