We are at the beginning of a New Economic Era and Geo-political Reordering that confers great opportunities for the Real Estate Sector in Mexico. The key opportunities are: geographic location and trade agreements, with potential access to 1.36 billion consumers, growth in financial and real estate services with 13% of Gross Domestic Product (GDP), and the growing middle class with 47 million people (37% of the total population) and the increased participation of women in the labor market, with 46%.
With nearshoring and labor demand in Mexico, our country recorded that of the total Foreign Direct Investment (FDI) in the manufacturing industry, 20% came from Asia.
In 2023, it was confirmed that the pipeline of Asian investors in the real estate sector in Mexico is the fastest growing and will continue to be a trend for the next 3 years, so it is worth focusing on the study of the real estate landscape in the country.
Among the challenges facing the real estate sector in Mexico are: energy, communications and transportation infrastructure, application facilities and permits, public security, tax incentives for investment, and technical training and updating programs for workers in the sector.
As a result, the impact of inflation on the real estate sector in Mexico has been among the highest in the last 20 years. Inflation in the construction sector has slowed down from the growth rate it presented during the first months of the year. This year, inflation is expected to have a downward trend; however, it is also likely to remain at 4%, according to information from the journal El Economista.
Furthermore, 56% of the Managers of the Real Estate Sector in Mexico are optimistic about the recovery and stability after complicated years by the COVID-19 pandemic. The factors that mainly affected the industry were the effects of public policies in Mexico, the increase in interest rates, the economic effects of the pandemic, the potential economic recession in the USA, problems in the supply chain and the war Russia. – Ukraine.
With reference to project financing, the main developers feel supported by financial institutions. Sixty percent stated that they have had no difficulties or inconveniences in obtaining a bridging loan.
The Guadalajara metropolitan area shows the fastest growth in the unit price of new housing, with growth rates of more than 22%, making it the second city with the highest unit price, which is $35,269/m2, where more than 70% of active projects are for apartments. Likewise, this area maintains a trend towards verticalization and an increase in sales values. Industrial Development and Foreign Investment in the region are important mobilizers of economic growth and business generation. Mexico City has the highest unit value, mainly due to the high concentration of supply in high segments, according to data provided by the Federal Mortgage Society (SHF).
According to the publication Inmobiliare, Jalisco and the State of Mexico are considered the best states to invest in Real Estate, as they have capitalization ratios higher than 7%.
Guadalajara, the Cuauhtémoc District in Mexico City, Mérida, Querétaro and Naucalpan are the 5 areas of the country that top the list with the highest capitalization ratio when acquiring a property and renting it, being above 8%.
The office real estate sector is already showing signs of recovery, due, among other things, to the decrease in new constructions, the conversion of offices to other uses such as housing and hospitals, investments and improvements in existing buildings, and better leasing conditions.
The office construction industry depends on the economic performance, currently with the growth of exports to the United States, the dynamism of the industrial and Tourism Sectors.
In conclusion, for this year, a complex scenario is foreseen, mainly due to economic and political threats, but with great opportunities to reinvent itself and take advantage of the demand derived from nearshoring and other political-economic phenomena.
At VAHG we provide legal services with great experience and knowledge in the Real Estate Practice, being leaders in this Practice in Mexico. We are backed by a solid legal infrastructure with more than 30 years of combined experience, focused on timely assisting our clients with the commitment and integration within the legal framework in Real Estate.
For more information regarding our professional services, the Real Estate Team is at your service.
| Fernando Hernández Gómez | Partner
Real Estate +52 (33) 38171731 Ext 225 | fhernandez@vahg.mx |
Ana Karen Inzunza Sánchez | Associate
Real Estate +52 (33) 38171731 Ext. 235 | ainzunza@vahg.mx |
**The publication of this document doses not constitute legal, accounting or professional advice of any kind, nor is it intended to be applicable to particular cases. This document only refers to laws applicable in Mexico.