Mexico’s commercial real estate industry is experiencing a second wave of growth brought about by the creation of investment trusts, significant changes in regulations, competitive land prices and the economic development of new business centers across the country.
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According to The Mexican Association of Real Estate Professionals, the sector is expected to see a growth of 6% in 2014, which, according to its president, Martha Ramirez Gallegos, will exceed the predicted 2.77% GDP growth for this year.
In a recent annual survey conducted by The Association of Foreign Investors in Real Estate- (AFIRE) Mexico was listed as the third highest emerging country for commercial real estate investments, following China and Brazil. Without a doubt, this real estate boom is reflected in the growing number of residential, commercial and industrial construction projects being carried out in Mexico City, Monterrey, Guadalajara and Queretaro, to name but a few. These are literally changing the face of the country.
According to Jorge Castañares, business director for Aguirre Newman Mexico and specialist and professor of real estate, the creation of the Real Estate Investment Trust (FIBRAS) as well as the Capital Development Certificate (CKD) jumpstarted the second wave of growth in this sector; the first wave was experienced in 1994 when the North American Free Trade Agreement (NAFTA) was signed. “In 2005 the Rental Tax Law was modified, entitling certain legal and trust entities to a fiscal allowance enabling them to absorb said tax and allowing structured long-term investments,” Castañares explained. Currently there are eight FIBRAS operating in the country that invest in real estate through the Mexican Stock Exchange and whose value has been estimated in the region of 170 billion Mexican pesos (US$13 billion).
Mexico has again become attractive to the energy industry; the manufacturing industry and corporate industry, Castañares said. Moreover, several businesses are returning to Mexico after having previously moved their operations to China in search of cheaper labor. This does not mean that the salaries are now cheaper in Mexico, but rather that a better qualified work force has been made available, in closer proximity to the United States market.
At certain border cities, such as Tijuana and Ciudad Juarez, traditionally known for their textile industries, things are gradually recuperating and statistics show that violence is falling. “Not as many businesses are leaving when compared with the situation as it stood a few years ago. On the contrary, they are returning to occupy some of the spaces that had been left empty,” states Victor Lopez Beltran, expert in Latin American businesses and Associate at Market Shanga (a strategies and operations consultancy firm).
As well as those already in place, over the last few years several industrial, logistic, business and techno parks have been built. These currently cover around 50 million square feet, spread out over 300 industrial parks of international quality. The amount of available office space has also shot up outside of Mexico City, in areas such as Toluca, Puebla, Hidalgo and the Bajio region. It is estimated that currently there are in the region of 4.5 million square meters of class A and B offices in Mexico, a figure that could well be doubled by the year 2020, states Castañares.