Real estate development continues to flourish, and not just in Mexico City. Monterrey is right behind it with fast growing residential, corporate and commercial sectors with the ambition to become the most modern city in the country. The 6th Annual Real Estate Business Summit will take place at the Hotel Quinta Real Monterrey in San Pedro Garza Garcia, Nuevo Leon which will provide the industry with a look into the future development of Mexico’s real estate sector. But before the summit, here is a quick look into Monterrey’s real estate market.
Industrial Boom Demands Office Space
Monterrey’s strong industrial sector is fostering the development of offices spaces throughout the state. According to Jorge Avalos, CEO of Fibra Mty, “Monterrey is a small market compared to Mexico City, with only 1.2 million m2 of office space, compared to the 5-6 million m2 in Mexico City.” Monterrey has been attracting the service and manufacturing sectors for some time but it has recently began grasping the attention of more banks and major law firms to set up regional offices. “Vacancy rates in Monterrey are around 20 percent, in Guadalajara they are around 4 percent and in Mexico City around 14 percent. Absorption is a big issue in every market and the rate in Monterrey is around 70,000-80,000m2 per year so by 2019 vacancies will be between 6-8 percent,” Avalos says.
Mixed use continues to play a big role in corporate development and according to Avalos, there are three emerging office space corridors – Santa Maria, Campestre and Valle Poniente. “Local developers are coordinating to measure how their developments can co-exist as a community. Some of these corridors are linked by paths that contain facilities like hospitals, vertical and horizontal housing, retail facilities and schools and this has been done through coordination and planning to become urban centers,” says Avalos.
Commercial Development on the Rise
The commercial real estate sector has experienced the most growth in 2016 and 2017 will be no different. According to Colliers International 2S Commercial Market Report, there are more than 249 commercial centers in Monterrey and its metropolitan area. Most of these developments are located in the Valle and Garza Sada/Revolucion submarkets with 85 and 27 commercial developments, respectively. San Pedro Garza Garcia is the submarket with the largest commercial activity and growth and is expected to continue constructing in 2017-2018.
Monterrey’s market differs from that of Guadalajara and Mexico City. Eighty two percent of Monterrey’s commercial developments can be divided into four categories: Strip Malls (54 percent), Mixed Use (11 percent), Community Centers (9 percent) and Neighborhood Centers (8 percent). The expected developments for 2017-2018 includes 19 new commercial centers with more than half of them being Strip Malls.
Residential with Room for Growth
People want to live closer to where they work and play, driving the construction of housing back into urban areas. Mixed use developments have grown more popular in the last few years. As of 4Q16, there were 24 mixed use developments, seven under construction and its projected that there will be nine new projects in 2017. “We will continue to see more planned communities, mixed-use urban projects the introduction of senior living, student housing and self-storage,” says Carlos Rousseau, Senior Partner, President & CEO of Orange Investments.
For five years in a row, Nuevo Leon continues to be the state with the most housing development in the country according to Realty World Mexico. Nuevo Leon developed more than 69,535 homes in 2016, followed by Jalisco with 55,945 and Quintana Roo with 32,440 homes. Prices in Monterrey have also increased along with production. In the first quarter of 2017, the price of housing has increased 5.18 percent in comparison to 1Q16 with an average price of MX$744,943 according to the Federal Mortgage Society (SHF). Monterrey was the city with the highest increase, with 5.83 percent in comparison to 4.50 percent in Mexico City and 4.34 percent in Guadalajara.