LOOKING FOR LAND

Mexico 2019 | REAL ESTATE & CONSTRUCTION | VIP INTERVIEW

TBY talks to Mauricio Suarez, Director General of FICADE, on residential demand in Mexico City, current projects, and rental market growth.

What is your outlook for demand for houses and apartments in Mexico City?

There is a great demand for housing in Mexico City. The problem is the housing policies that limit the capacity of the industry to attend the demand needs; so the offerings are much lower than the demand. This means house prices are always going up, particularly in central areas. Mobility in Mexico City is extremely complicated, so housing in central areas are in high demand. The industry does not have the capacity to produce enough housing to meet demand, and this is an issue the government needs to solve. We need to reuse large plots of land so developers can develop megaprojects with many units to address this demand. Another factor that impacts the industry is that all new projects are being put on hold while the new administration reviews everything done under the previous administration. This has stopped new projects from flowing, and permits are difficult to get processed; however, the demand and need for housing means it is just a matter of time before things start to move forward. Nevertheless, we see Mexico City as a strong market with great potential to continue growing.

Mexico City requires tens of thousands of new houses a year to meet demand, but only 15,000 are being built. Is the city realistically able to develop that number of houses?

It is extremely difficult to develop a project, and there are not many housing projects taking place. There is land, though we do not have the right land usage rights, so in many areas we lack the housing density the city requires. For example, one might only be permitted to build four or five houses on a plot that could potentially take 15-20 units. The government needs to address this urban planning issue. Other cites globally tend to be more densely developed than Mexico City—they build higher and with smaller units. That is something that Mexico City needs to incorporate in some way. The infrastructure and utility services also need to be improved so more people can be accommodated on a single piece of land.

What strategies does FICADE use to continue acquiring land and developing projects?

Part of my job is to look for land. I spend about 40% of my time looking for new opportunities, and we are extremely active, with many brokers who provide land options. We have to move quickly to take advantage of these opportunities. Sometimes, we get into bidding processes for projects. We have a great business plan that I am extremely proud of, though it is a great deal of work. We may see 100 options and proceed with only five to eight of them.

How much land does FICADE currently own in Mexico City?

When we acquire land, we start developing it straightaway. We do not have any land in reserve. Having land reserves works well in the provinces, where things need to be organized, like bringing in infrastructure before one can develop. In Mexico City, it is difficult to have land reserves because land is so expensive, and there is no need to wait to develop it. Financially, in Mexico City it would be silly to just buy land and hold it in reserve. We do all the due diligence and start developing a project immediately.

What projects is FICADE currently developing?

We currently have 31 projects as a group, the main projects are; Revolución 757, where we have 168 units under construction. That development has been extremely successful because of its location amenities and green certification; we only have 35 units left and are still in the early stages of construction. The completion date is December 2020. We have been selling 15-25 units per month. We have another project called San Lorenzo 1009 with also 168 units which offers a commercial zone in the lower level and is going to have also a green certification. We have another project, Amores, with 129 units, located in Coyoacán, close to the Mitikah project in a fantastic neighborhood. In both projects Amores and San Lorenzo our brand concept called Sky Park will have many rooftop amenities, including a pet zone, jacuzzi, a playground, vegetable gardens, barbecue facilities among others. What people want most are open spaces, which are difficult to find because we do not have spare land in the central city. We are still in the permitting and licensing stage for these Sky Park projects, though we expect a great deal of interest from buyers once we get started.

What is your target market for these developments?

We build small, two- to three-bedroom apartments of 60-100sqm with many amenities so people can go out and enjoy the shared spaces, including a cinema. We also develop small projects with no amenities that attend other type of clients that prefer small projects. The price ranges from MXN2.5-10 million (USD130,700-522,785), which are around the central city averages.

What is your opinion of the trend of building urban housing developments for rent and not for sale?

Rental units have great potential. This trend is becoming more professionalized in Mexico City. Currently, we have a large secondary or informal rental housing market here, and we need to develop a more institutionalized product and mechanisms for renting, such as a legal framework. It is more common for millennials and others who want to have less debt to rent rather than buy. This is definitely a great opportunity in Mexico City and globally. However, it is more akin to being in the office space segment, where one owns and maintains the building they lease. FICADE is into the buying and selling model currently. We will enter the office and rental market in perhaps four or five years' time.

What is your vision for FICADE for the coming years?

I am extremely active in developing the company's culture at the moment. We are doing programs to design FICADE's culture for the wellbeing of the people within the company. Having a great culture will benefit the projects and our end clients. As our culture in the company I want to deliver projects that also have a social and environmental commitment as a result of that we will certificate all of our buildings with an EDGE certificate. We want to be the developer with that certain magic in its culture so that our clients have an excellent experience buying a house in Mexico City. Buying a house is the most important decision for a person. We see this area of opportunity for making our clients feel special, and FICADE is doing its best to make sure their experience is the best. We want to have a long-term relationship with our customers, so when they decide to move to a new or bigger apartment, we are also there for them. We do not want to be the biggest; we want to be the best in terms of quality and experience.