MANAGEMENT & CONSULTANCY

Mexico 2019 | REAL ESTATE & CONSTRUCTION | B2B

The best defense against political instability affecting North American trade is a sound understanding of where, when, and how to invest.

Javier Lomelín
JAVIER LOMELÍN
Director General
Colliers
Victor Lachica
VICTOR LACHICA
President & CEO of Mexico and Central America
Cushman & Wakefield

How is the real estate market reacting to the geopolitical volatility impacting Mexico?

JAVIER LOMELÍN Most of the decision makers in the real estate market are in a wait-and-see mode. They are most attentive to the regulatory change in the free trade agreement between the US, Canada, and Mexico. We expect these changes to be positive. Once established, the market will recover, especially in industrial manufacturing and specially the automotive sector. The industry is also expecting changes in local regulations, including Mexico City. Major projects of over 10,000sqm are on hold as developers await the new rules to be applied to the city, to see what it means for their projects before advancing.

How well are construction projects in the country adapting to the rising demand for international standards?

VICTOR LACHICA The growing level of quality in the country is clear, especially when comparing older buildings to newer ones. Mexican developers have been able to attract international investors and players that are substantially improving the quality of projects in place. For example, Mexico began LEED certification for projects seven years ago, and today, there are more than 180 projects under scrutiny for LEED certification. Mexico is moving in the right direction when it comes to the type of projects and the quality of spaces it is developing. LEED certification is becoming widespread not only in commercial buildings but also industrial, hospitality, retail, and housing.

What kind of advice would you offer to investors considering Mexican real estate?

JL Companies need to make sure that they are specialized in the areas they are entering, or developing in. They also have to be familiar with the conditions of each neighborhood; being able to read the market's behavior and grasp the trends. They have to try to forecast what will happen by the time the project is ready for the market. We find industrial real estate to be among the healthiest segments as it has a low vacancy rate. Many of these projects are built to suit, which is an advantage in allowing developers to build industrial plants and warehouses in months, rather than years. Another opportunity can be found in distribution and logistics centers due to changes the retail segment is undergoing. E-commerce is creating more demand for distribution centers and warehouses of different sizes, locations, and capabilities. Companies are under pressure to be as close to the market as possible, bringing good opportunities for developers. However, there are still opportunities in real estate for office developments as many companies are looking to expand, consolidate and get savings on rents. There are international companies arriving continuously. Having said this and taking into consideration the cycle of the market today, industrial real estate is the best bet.

VL We are helping companies become more efficient in their use of space, be it offices, industrial spaces, or retail. Previously, offices accounted for 15-20sqm per person, but now, private offices are smaller with more open space and amenities for everyone. We were able to implement these new practices into our office renovation, reducing the 14sqm of space used per person to 10sqm. When it comes to industrial spaces, warehouses have become an incredible example of how automatization tremendously helps companies utilize their space efficiently. While there are still many businesses that need the showroom space, there is a trend of seeing less product space in retail as more clients prefer e-commerce. Everything is changing, and we are helping our clients to adapt to the new way of managing life, work, and shopping. The new generation is looking to live as near as possible to the places they access, and Mexico is trying hard to move forward with such new trends. Clients are becoming more global and they want to work with companies that can assure the same quality, practices, and ethics around the world. Therefore, we are working on our abilities to meet these needs consistently throughout sectors by reinforcing our local capabilities of market research, property and facility management, project management, brokerage, and advisory services.