2019 A YEAR OF CHANGE

Mexico 2020 | REAL ESTATE & CONSTRUCTION | VIP INTERVIEW

TBY talks to Lyman Daniels, President of CBRE Mexico & Colombia, on overcoming a challenging 2019, diversification, and expectations for the future.

How did CBRE react to the tumultuous time in Mexico in 2019?

2019 was a year of changes and modifications. And the changes were not just governmental; they were also social, economic, and commercial. CBRE's great advantage is its ability to react to those changes quickly and proactively and being able to respond to its clients with solutions in times of uncertainty. Our ability to lead our clients through such a changing environment was our forte in 2019. I have been in Mexico for 25 years, and 2019 saw more changes in one year than I have seen in 25 years. Whether one agrees or not, the ecosystem is changing, and if they cannot react, they cannot survive. CBRE has been able to react; more importantly, we are enabling our clients to react to this change. As a third-party provider, our job is to help our clients with their large portfolios. We do everything from brokerage to project management. We do the administration of property management, facilities management, and valuations. We are bringing in several other business lines soon that will continue adding to our whole suite of client services.

The amount of investment in construction has dropped in Mexico. How is CBRE adapting to this new context?

Investment has only dropped in some types of construction. Looking at Mexico's industrial sector, which is a large part of our business, there are two sides: logistics and manufacturing. Both of those are growing tremendously. Firstly, it is growing in the third-party logistics segment, which is the people who ensure goods, parts, and supplies are getting from A to B so manufacturers can produce. More importantly, we have seen growth in e-commerce. All large stores have tremendously increased their e-commerce, and Mexico is catching up quickly with the US and Europe in terms of e-commerce. All that e-commerce requires logistical space because e-commerce is not as easy as normal retail. It is a logistical challenge because millennials want things delivered correctly and quickly. That is not an easy task, particularly for a country without that distribution infrastructure for its retail sector. Meanwhile, the industrial side is strong and constantly improving. Some sectors have come down and others up, but we are not entering into a dark cloud of no activity. This is the most competitive industrial market I have seen in 25 years.

What factors are behind the current competitiveness in the Mexican industrial market?

E-commerce is one reason. The auto manufacturing sector in Mexico is larger and stronger than it has ever been. A number of plants have opened up in the country over the last five years, creating a huge amount of demand and growth for the industrial sector. There is steady growth countrywide, not just in certain cities, industries, or markets. When I came to Mexico 25 years ago as a developer, there was a steep learning curve in the country. There were some great buildings being built, though not all of them were super high-quality buildings. Today, the overall average quality of the buildings being constructed in Mexico is competitive with anywhere in the Americas, Europe, and Asia.

What kind of additional services is CBRE planning to offer in the medium term to further diversify the company?

Institutionalization of the market is inevitable. More publicly traded funds and companies are coming onto the market, such as developers, third-party funds, and banks. These institutions are demanding the institutional-level services they find worldwide with CBRE. Part of that includes the ability to finance those projects by using debt, not just equity. In these cases, CBRE's role is to be their eyes and ears and take care of their administrative needs. These banks and funds need a partner to be able to grow. We will be bringing these same services to Mexico soon.

What are the biggest issues facing CBRE's clients in Mexico's changing market?

Many of our clients have to make decisions without enough information. A client will need to grow or change the way they work, and, sometimes, they have no experts to tell them what is going on. CBRE's priority in 2020 is to help remove that lack of information. If I were a business owner, I would want a partner who can show me the options and the risk and reward curve. Owners want to know where the market is moving, what to expect, and what the important market drivers are, which CBRE can educate our clients about.

How did the number of deals you were able to close in 2019 compare to 2018?

They were similar in number, but different in types of deals. We saw many larger deals in 2019, including record-breaking ones. Our international investors and tenants are extremely bullish in Mexico. They have embraced the country, knowing that, regardless of politics, one looks for countries that have rule of law and allow their investments, production, and operations to grow. We have seen global players come back to Mexico for all the right reasons, like location and demographics, all of which have given a huge uplift on the outlook in Mexico. CBRE's Mexican operation has historically been one of the fastest-growing CBRE operations worldwide for the last 10 years, and I fully expect to continue that growth. It will come through vertical penetration throughout the market, growth through our operations in various sub-markets throughout the country, and amplification of our service lines.