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Mexico Real Estate Report Q3 2011
Business Monitor International, June 2011, Pages: 66
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.
Mexico is well into its second year of positive economic news and this, along with a gradually improving business environment, this has reinvigorated the country’s commercial real estate sector. Tax cuts in the US should keep external demand strong. However, the Mexican economy is exceedingly susceptible to fluctuations in the US economy and any movement there will affect Mexico. Internally, the country is still plagued by an uneasy political situation and the continuing strength of heavily-armed criminal gangs. The government has a lot of work to do to quell the activities of these gangs.
Commercial real estate has, until now, been relatively well balanced and got itself through the harder times without generating a mass of over-supply. Vacancy rates remained reasonably low through 2010. However, the office sector is particularly attractive to investors and this report may see this push up supply. The government is currently intervening in the residential real estate market, particularly with a view to increasing access to and the availability of low-cost residential property. The government has offered incentives, both to residential real estate developers and to potential (mostly first-time) home-owners, which may well help millions of households buy their own home.
Some of the key opportunities currently in the real estate market are:
- Improving economic strength and general business and consumer confidence will increase demand for all types of real estate space. However, this has not, as yet, led to any over-heating of the market. In-country sources indicated that they are expecting single-digit rises in rents over the course of both 2011 and 2012. Capital values and rents look set to move together and means yields should remain as they are currently.
- Improving credit availability to both developers and residential house purchasers should allow more space to be built and for demand to increase.
Some key risks to the current real estate market are:
- Strength in the office sector means that take-up should increase, but the popularity of this type of development may mean that, especially in Mexico City, new projects coming online in the next few years will exceed the demand for space.
- Local media have numerous reports of sub-standard building complaints and this needs to be addressed if the industry is to grow as a whole. As demand grows, the risk of shoddy building work increases and threatens the success of both government property purchase-inducing schemes and the credibility of the industry.
- Over-heating in a particular sector of the property market may result in the removal of government incentives and other tightening measures, meaning that there will be excessive vacant space in the incentive-related groups and that projects will stall.
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