Real Estate & Construction

Time to Grow Up

Growth in mid-sized cities

The widespread urbanization of Mexico's once predominantly rural population is now shifting away from its quickly saturating largest metropolitan centers toward its many medium-sized cities.

Fans of the Golden Age of Mexican cinema from the 1940s and 1950s will conjure scenes of isolated desert towns situated along dusty main streets, replete with foraging chickens, an idle burro, and the village boracho splayed out in front of the saloon. For a long time, this scene represented the reality of much of Mexican life outside of a few major cities. However, like much of the world, Mexico has experienced massive urbanization over the past half century, transforming many of its secondary cities from rural outposts into modern urban centers with thriving economies.

Today, 75% of Mexicans live in one of the 384 urbanized conglomerations in the country. The National Urban System (Sistema Urbano Nacional) classifies cities in Mexico into two categories based on their physical size and how populous they are. Urban centers with 50,000 inhabitants or more are classified under the main subsystem, of which there are 135, holding a total of 74.6 million inhabitants. Cities those with populations between 15,000 and 50,000 people are designated as constituents of the complementary subsystem, which total 249 cities and hold 6.6 million people.

The country’s three largest urban areas in particular have expanded exponentially. Mexico City has become one of the three most populous cities in the world and is considered an alpha city by the Global City Index, while Guadalajara and Monterrey are on the list of the 15 largest cities in Latin America.

The exponential growth of the Mexico’s largest cities has caused significant increases in property prices, pushing residents to look for viable alternative options in the form of the country’s medium-sized cities. As Mexico becomes a more diversified economy, industrial parks and clusters have chosen previously unlikely places to settle, causing masses of people to move in search of job prospects. The development of infrastructure and connectivity in these cities has also prompted their accelerated growth.

According to Tinsa, a Mexico-based consulting group, the golden opportunity for real estate companies in Mexico is now concentrated in the nine medium-sized cities of Toluca, Querétaro, Puebla, Veracruz, Mérida, Villahermosa, Cancún, Playa del Carmen, and Tijuana, which together account for 57% of Mexico’s GDP and contain over half of the country’s population. The Bají­o region has been the most economically successful area in Mexico in recent years, driven mainly by immense automotive and aerospace investments. This has driven many Mexicans to move to places like Querétaro, Aguascalientes, and León, which have exhibited some of the highest growth figures in the entire country. Aguascalientes and Querétaro are the fastest growing states in Mexico, growing at 11% and 6.4%, respectively.

In the north of country, Tijuana and Saltillo also present high rates of real estate growth for particular reasons. As the Baja California region becomes an epicenter for research and development and vast numbers of companies continue to establish operations in the state, Tijuana, once torn by violence and high levels of underdevelopment, has become an attractive hub for entrepreneurs, engineers, and technicians. On the other hand, Saltillo, the capital of Coahuila, is located just an hour away from Monterrey and has become an attractive option for people working in the industrial hub of Mexico as real estate prices have risen sky high in the area.

In southern Mexico, Cancún and Tuxtla Gutiérrez present the highest rates in real estate development. The former has grown 17.5% —compared to the 8% national growth rate—in the last five years in large part because of its position as one of the most important pulls for tourism in the whole country, largely increasing the real estate demand in the surrounding area as well. Tuxtla Gutiérrez, the state capital of Chiapas, is a clear example of another phenomenon accruing in Mexico where local migration from the countryside to the city in largely rural states has caused cities to grow enormously, making these cities some of the most promising markets for real estate developers in the country. Tuxtla Gutiérrez grew 30% from 2005 to 2015.

Cities in Mexico are expected to grow exponentially in the following years as a result of the recently approved reforms, increasing incomes, and the deepening diversification of the economy. The largest share of this growth is expected to happen in mid-sized cities, and the opportunities for real estate developers are bigger than ever.

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