The office market in Mexico reports a recovery during 2023, successfully facing various challenges thanks to its ability to adapt in all facets of the real estate business.

In general terms, there is a downward adjustment in the vacancy rate, relative stability in office rental prices, as well as the adaptation of surfaces to meet demand requirements. In addition, a preliminary evaluation of new projects that begin to be outlined for the year 2024 in some markets is carried out, identifying specific opportunities.

The year ended with an appreciation of 13% of the Mexican peso against the dollar, within the inflation containment parameters established by the United States Federal Reserve and the Bank of Mexico, the need to adjust downwards has been observed. income premises of office portfolios, this is due to the economic conditions that affect contracts in dollars.

2023 closed with a national vacancy rate of 18.1%, representing a notable reduction compared to the 20% recorded at the end of 2022. This reduction is notably accentuated in Tijuana, where vacancy is adjusted downward by 6 percentage points, closing with 1.6%, thus marking the lowest rate nationwide. Guadalajara and Querétaro follow with vacancy rates of 3.7% and 3.1% respectively. Meanwhile, in the country's capital, the availability of vacant spaces persists in excess of 2.5 million square meters, equivalent to 20.3%.

Gross demand manages to advance in the midst of a recovery scenario, which quarter by quarter has allowed an annual increase of 23% at the national level, with more than one million 83 thousand square meters of offices leased during the period.

Exceeding the average increase at the national level, Mexico City is positioned as the most representative office market in the country, a third above the accumulated gross demand in 2022. On the other hand, Tijuana emerged as the market with the highest percentage growth in 2023 , registering an increase of 113% compared to the previous year, ending the year with more than 26 thousand square meters of gross demand. This growth is attributed to the arrival of various relocation processes to the border and expansions that demand additional space.

The gross demand for the fourth quarter of the year in Mexico City shows a trend during the first nine months of 2023, where greater activity is recorded in the submarkets of Insurgentes, Polanco and Santa Fe. This fact indicates that the recovery is significantly permeating in the main submarkets of the country's capital.

However, we have also observed an equitable amalgamation of contracts denominated in national currency, characterized by the inclusion of early delivery periods that have provided flexibility in certain negotiations, thus favoring tenants.

In relation to construction, developers initiated projects in those markets and submarkets where the vacancy rate presented a new investment opportunity. The number of office buildings that are still under construction at the end of the fourth quarter of 2023 reaches one million 155 thousand square meters, reflecting an increase of 10.8% compared to projects in development at the end of 2022 nationwide.

In Mexico City, 625 thousand square meters are still under development, a figure that could represent approximately 3.2 times the average annual gross demand. This not only signals a sustained recovery in demand, but also reveals new opportunities that position 2024 as a favorable year for the start of new projects.

Monterrey, Guadalajara and Tijuana have projects in development that total 240 thousand, 85 thousand and 61 thousand square meters, respectively. In these markets, the projects completed during the fourth quarter of 2023 have continued to progress, adding 14 thousand, 6 thousand and 3.3 thousand square meters of offices to their inventories.

During the fourth quarter of 2023, 120 thousand square meters were added to inventory with the delivery of 8 corporate projects, in addition to starting the construction of two new buildings in Monterrey and Guadalajara.

Throughout the year, rental prices have maintained stability, placing Mexico City and Monterrey at the end of 2023 at $21.00 and $17.80 dollars per square meter per month, respectively. These values reflect minimal adjustments, close to 10 cents on the dollar, during the course of the year. Only Tijuana experiences an adjustment that exceeds one dollar per square meter annually, ending at $20.90 dollars per square meter monthly, a figure very close to that used in the country's capital.

Tenants increasingly appreciate the quality of the experience in the use of space and are willing to opt for spaces or offices that, despite having a higher rental price, effectively facilitate the development of their activities.

Although the work-from-home modality is still present in some companies, it appears to be giving ground, especially in those companies that have the capacity to allow a combination of in-person and remote work. This change has been favored by the implementation of regulations, in force since the end of 2023, that more precisely regulate remote work.

The outlook for early 2024 outlines emerging opportunities for several projects that were in the planning phase. Among these projections, a promising approach stands out in the implementation of new uses, the main beneficiary being a combination of shared spaces that incorporate levels of offices ready to be occupied through time-sharing modalities. This strategy not only reflects an adaptation to changing trends in the work environment, but also signals an innovative approach that takes advantage of the flexibility and efficiency offered by these shared spaces in the 2024 landscape.