The office market in Mexico City advanced cautiously in 2021, after its effects in 2020, according to various reports referred to by GICSA.
The company Cushman and Wakefield indicated in its Marketbeat report on the office market in Mexico City for the fourth quarter of 2021, that of the 10.4 million m2 of total inventory, the net absorption of offices in Mexico City contracted 264,000 square meters in the year.
The lower absorption has been reflected in a general availability rate of 19.2 percent.
This as a result of the fact that throughout 2021 the cautious behavior that began in 2020 persisted among most companies. The great uncertainty generated by the pandemic has prolonged the usual period of analysis before making real estate decisions.
It also indicates that, despite the fact that supply has continued to expand, the new balance in outlet prices reflects growth.
This is due to the fact that the standard of buildings that have increased supply is higher than historically observed and they are often conditioned and furnished buildings, which have higher than average asking prices.
Specifically for class A buildings, the growth has been 6.9% compared to the prices observed at the end of 2020 and they are trading on average 23 dollars per square meter per month.
Unlike other real estate sectors, the development of office buildings does not have defined groups of developers that group significant amounts of real estate.
GICSA explained that the development and commercialization of office buildings falls on various business groups such as builders, developers and entrepreneurs of lines other than real estate, who for various reasons, such as investment, income generation, tax strategies, operation and image build real estate that increase the supply of office spaces for rent.
From GICSA’s perspective, 2021 was the year to rethink the operation of the real estate industry.
The reconfiguration of the forms of work caused by the pandemic has particularly affected the office sector, which is still in the process of adapting to the crisis.
However, during November 2021, there was an increase in the capacity of office spaces in the country, in addition to the projected growth in demand for the end of 2022 and 2023.
In its summary of the Mexico City office market as of the fourth quarter of 2021, Colliers indicates that as of December 2021, in Mexico City, a total inventory of 7.0 million m² of Class A+ and A offices was registered in its 10 Submarkets, this was distributed in 4.5 million m² for Class A+ and 2.5 million m² for Class A.
The registered availability rate, in all the Submarkets of Mexico City, was 1.7 million m² (24.9% of the total Inventory).
According to the Market Outlook for Class A Offices for Mexico City in 4Q21 reported by JLL, as of December 2021 Mexico had an offer of 1.7 m2, of which approximately 43% of this offer is of conditioned spaces and 8% of the current supply (almost 178,000 m2) comes from 12 new buildings that were delivered during the year.
In this regard, the offer grew by 20% compared to the same period of the previous year.
Two years after the start of the pandemic, the market reflected its first signs of recovery during the last quarter of 2021, since most sectors have reported significant growth and upturns, demand is expected to reactivate during 2022.
According to the Solili platform, during 1Q21, a total of 72,000 m2 of new offices were added to the inventory of the eight markets monitored by Solili, which represented a total of seven new buildings. Mexico City stands out, adding just over 22 thousand m2, with two new class B buildings.
Solili comments that given the current scenario of oversupply, developers have been cautious in starting new buildings, opting to wait for more favorable scenarios for development and corporate real estate investment. This has caused construction to maintain a downward trend.
According to figures from Solili, at the end of the first quarter of 2021, almost 1.3 million square meters were under construction, almost 500,000 square meters less than a year ago, representing a decrease of 25 percent.
During the first quarter of 2022, the construction of four buildings began in the eight markets monitored by Solili, totaling 23,000 m2.
Only Mexico City and Mérida reported activity in this indicator. The buildings correspond to spaces of small dimensions, typified mostly as class B and located in traditionally residential areas.
For its part, the net absorption of the eight markets monitored by Solili, for the third consecutive quarter, remains with positive figures, not being the same for Mexico City, which after reporting positive figures the previous quarter, this quarter returns to ground negative with a figure of -25,000 square meters.
This behavior is due to a slight increase in unemployment that ended up having a negative impact on the behavior of net absorption.
Office market in other cities
The medium markets, such as Monterrey and Guadalajara, reported net demand figures of 7,000 and 3,000 square meters, respectively, while the emerging markets with the best performance were Puebla and Querétaro, which even exceeded the figure registered for the medium markets.
Historically, there has always been a correlation between employment and the demand for office space, in addition, due to distancing measures, a large number of companies have adopted the hybrid work mode, which alternates between face-to-face and remote work. This was caused by the appearance of the Covid-19 pandemic.
Colliers mentions in its report on the Mexico City office market for the fourth quarter of 2021, that despite the contraction and reconfiguration of office spaces under new sanitary measures, a possible recovery is expected in the City Office Market. of Mexico towards the end of 2023 or the beginning of 2024.
This consideration would be given in how the condition develops with the new wave of contagion and its variants, which is in line with the forecasts of economic recovery by specialists, who estimate a reserved growth of the Mexican economy for the coming years, mainly based on consumption, investment and the success of vaccination plans.
The offices, as a symbol of identity and belonging in companies, will continue in force as long as they are shown as the optimal space for collaboration and maximization of productive time for workers.