The crisis generated by Covid-19 had a decisive effect on a corporate real estate market that was growing rapidly but where many more square meters were produced than were demanded, and this led to significant oversupply in the main Mexican markets.

During the pandemic, construction slowed down and almost no office projects began in the face of a scenario of buildings that were completed and went empty to swell inventories.

Some mixed-use projects timidly began with a significant share of residential use that, motivated by advantageous interest rates, had a boost in their growth. These uses were paired well with retail or office allowing developers to dilute the risk by concentrating on a single segment.

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This slowed down the growth of office inventories in the country, which had been growing on average at a rate of 6%. Mexico City, which three years ago concentrated 80% of the national inventory, now has a 71% share at the end of 2Q 2022, and new emerging markets such as León and Mérida join the national offer.

Markets such as Monterrey, Guadalajara y Tijuana already had the presence of emblematic Class A and B office buildings during 2Q 2018.

Tijuana and Guadalajara between 2Q 2020 and 2Q 2019 registered the highest inventory growth of 13% and 17%, while Monterrey had its highest inventory growth between 2Q 2019 and 2Q 2018 with 15%.

For its part, Mexico City, which exhibits the greatest institutional development where investment trusts played an important role in promoting it, had its most outstanding growth of 6.8% between the second quarter of 2019 compared to the same period of 2018. At the end of 2Q 2022 the annual growth was 3.1% exceeding 11.7 million square meters.

In terms of inventory distribution, five capital corridors such as Insurgentes, Polanco, Reforma, Santa Fe and Norte account for just over three quarters of the total at the end of 2Q 2022.

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The vacancies of the main markets such as Mexico City and Monterrey with 22.8% and 17.9% as of June 2022, although they have been adjusting downwards, still remain at important levels. The remainder of 2022 and 2023 will be decisive in verifying whether demand will indeed maintain its rate of sustained growth and unemployment will be at its usual level in periods prior to the pandemic.

Other markets such as Querétaro and Tijuana have maintained good levels of positive net demand, so it should be expected that in a scenario where new constructions do not start, vacancy will gradually reach levels not marked by the oversupply.

In the last year, the inventory of national offices has had a growth of only 2%, when in pre-pandemic periods the figure was three times higher, this has been due to the fact that many projects changed direction, others were delayed and did not have been delivered, some that have less than 20% of construction are still considering changes in use, all this has caused the growth of the inventory of offices at the national level to be so low.