The strength of the Mexican currency can be good news for certain sectors of the economy; however, this phenomenon could affect the performance of real estate investment trusts (Fibras), according to the real estate platform Solili.

So far in 2023, the Mexican peso has appreciated 4.7% against the US currency; until May 24, it was quoted at 17.85 pesos per dollar.

The behavior of the national currency could be explained by a set of factors, among which are the increase in remittances, the inflow of foreign direct investment due to the relocation of companies (nearshoring), the restrictive monetary policy applied by the Bank of Mexico and increase in income from tourism.

Of interest: Industrial Report May 2023, demand and construction triple with respect to the same period in 2022

In addition, the world growth outlook for 2023 anticipates a slowdown, where the global risks of inflationary pressures, the worsening of geopolitical tensions together with more demanding financial conditions still remain.

According to Solili's analysis, this scenario generates a strong peso that can benefit sectors that depend more on imports, but could have negative effects on Fibras that have a significant proportion of their income in dollars, which would directly impact their income projections. However, those Real Estate Trusts that maintain some debts in dollars would benefit.

The portfolios and the types of real estate that comprise them are an essential part of the performance of real estate Fibras. Some that are structured exclusively with properties that belong to the industrial sector, can take advantage of the increases in demand generated on the Mexican border, where vacancies have reached historical lows.

Despite the boom in the industrial real estate sector, Solili highlighted that the portfolios with the greatest exposure to dollarized rents will see their potential income affected if they do not have contractual adjustments that allow them to absorb the impact.

Consult here: South submarket of Ciudad Juárez, epicenter of industrial investment

Fibra Mty, for example, carried out the sale and purchase operation of the Zeus industrial portfolio, made up of 46 industrial buildings located in 11 national markets and was able to double its inventory.

“This allowed him to increase the defensive characteristics of the portfolio, by increasing the percentage of dollarized revenues and extending the maturity profile,” Solili said.

Thus, the last report of results for the first quarter of 2023, the Trust directed by Jorge Avalos Carpinteyro, reflected that the unfavorable exchange effect due to the depreciation of the dollar against the peso was almost entirely offset by the contractual increases in rental prices. and due to the operation of the Zeus portfolio, it caused them to remain aligned with the results of the same period in 2022.

In Solili you can consult industrial warehouses available in Mexico City, Monterrey, Tijuana and Ciudad Juárez

Original note