Commercial Real Estate Market In Mexico - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)
The Mexico Commercial Real Estate Market is anticipated to register a CAGR of more than 6% over the forecast period.
Key HighlightsTourism accounts for nearly 10% of Mexico’s GDP, and it is expected to do well in the future. Before the pandemic, the Mexican tourism industry was expected to grow by about 15% to exceed USD 9 billion in 2021. It is now estimated that the industry could reach almost USD 17 billion by 2025.
According to the Ministry of Tourism of Mexico, the country welcomed 31 million international tourists in 2021, representing an increase of 28.1% compared to 2020. Foreign exchange income from international visitors reached USD 18.43 billion in 2021, an increase of 67.6% against 2020. In addition, average annual hotel occupancy was 45.9%, 19.9 percentage points above 2020, when the sector's activity plummeted due to the COVID-19 pandemic.
Traveler confidence improved because of the application of vaccines against COVID-19 in various regions and countries. The tourism sector's GDP reached a 7.1% share of the economy by 2021, and by 2022, the indicator is expected to increase to 8.3%. Real estate and tourism are large contributors to the Mexican economy. The tourism industry is one of the greatest growth drivers for the country and has a significant impact on the real estate sector.
Mexico City, Tulum, and Merida regions are becoming the preferred destinations for real estate investors due to the growth of tourism sector in this region. Further, these regions are currently experiencing a rise in urban growth and investment in eco-tourism. This boom has led to the the development of many real estates projects, such as museums, shopping malls, and even concert halls.
Increase in demand for industrial real estate driving the marketThe macroeconomic situation may have lost impetus, but the fundamentals of the industrial sector were still strong as 2022's third quarter drew to a finish. Due to a robust leasing market in 2021, tenants moved in this quarter and occupied almost 123 million square feet of manufacturing area. Despite a minor decline in leasing activity quarter over quarter, the market appeared to be resilient with 134.3 million square feet area leased in Q3 2022.
The overall vacancy rate in industrial markets decreased for the eighth consecutive quarter, reaching an all-time low of 3.3% in Q3 2022. Development rates are currently in pace with demand as vacancy rates continue to decline. Currently, 633.8 million square feet of commercial real estate have been built, an increase from the previous quarter.
It costs more for investors to fund new agreements or refinance current loans, and tighter financial conditions typically have a direct influence on commercial property values by reducing investment in the industry. They might also have an indirect effect on the industry by slowing down economic growth and lowering demand for commercial real estate like stores, eateries, and factories.
Commercial Real Estate Market in Mexico Competitive AnalysisMexico’s commercial real estate market is fragmented due to the presence of a large number of players in the market. The Mexican housing market is not driven by speculators. The major players include NAI Mexico, Hines, Onni Contracting Ltd, Groupo Sordo Madaleno, Grupo Posadas, and many others. There are many developers, and it is highly competitive. Medium-sized and small-sized real estate developers arise in strategic regions of the country, and there is a boom in the use of financial investment instruments, such as Fibras and CKDs.
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