Mexico. The sector expects the vacancy rate in Mexico City's top 10 markets to reach 20%, with new buildings put into operation.
The growing supply of offices in Mexico City has increased unemployment to levels not seen in several years, before which developers will take a pause to conclude the projects in development before starting to plan new ones.
"New projects have slowed down. Right now it makes no sense to start a new project with the oversupply that exists. There has been a significant brake on acquisition projects, but not so in the demand for spaces by corporations, "explained Héctor Klerian, international director of the real estate firm JLL Mexico.
To this is added the brake on construction permits in Mexico City, added the director, which also acts against the start of new projects. According to JLL data, in the capital there are about 1 million square meters of offices that are in planning and have not yet begun their construction.
At the end of September, the average unemployment rate in the 10 main markets of Mexico City was 15%, but it is likely that by the end of the year it will increase to 20%, with the commissioning of new buildings.
The increase in this percentage is due to the integration of new projects into the inventory, in addition to other factors such as exchange rate volatility, since a large part of the leases of high-quality offices are denominated in dollars.
"There are 1.2 million square meters under construction, that is, it will continue to increase oversupply and that will pressure rental prices downwards and increase availability. It creates a market with a little bit of uncertainty," Klerian said.
Over the past five years, Klerian stressed that the supply of offices far exceeded the demand for space. At the end of September, the total demand for offices (from new tenants or by change of office) was 646,244 square meters, according to JLL data.
Of this total demand, the greatest absorption of spaces was concentrated in the North and Insurgentes corridor, with 36% of the total. The JLL executive explained that this uptick in demand for offices in both corridors so far this year stems from the change of government offices from buildings that were damaged in the September 2017 earthquake.
