Commercial Investment Real Estate July/August 2019

CCIM Q& A Cross-Border Opportunity by Catherine Simpson Olson CIRE: What is the state of the commercial real estate market in Mexico? Garcia: Business opportunities in Mexico have never been more prevalent. The current stable economy and the upcom- ing signing of the USMCA will open new opportunities for 12 July | August 2019 American and Canadian companies to start, or continue, doing business in Mexico. Mexico serves as a gateway for American companies looking to expand their businesses in Central and South America. CIRE: What are the strongest markets in Mexico? Garcia: Total class A office building inventory in Mexico City is 68.8 million square feet (100 million sf if all classes are con- sidered). Foreign reserves are over $200 billion, making the peso a stable currency. Total construction of new Class A buildings is about 20 million sf, average annual absorption is over 5 million sf, and the annual vacancy rate for 2018 was 17.7 percent. Annual inflation in 2018 was 4.6 percent, the lowest rate in recent years. For 2019, it is estimated to drop further, to roughly 4 percent. The current exchange rate is about 19.20 pesos to the U.S. dollar. It reached a peak of over 21 pesos per dollar in early 2017. CIRE: In Mexico, are you seeing growth in existing versus new construction? Garcia: The answer is divided by region. In the central region of Mexico, the construction sector grew significantly in the past five years. Having said that, we will see more growth in the existing inventory in the coming years; however, construction will not stop. In the south and southeast of Mexico, it’s a different story. We believe construction will grow in these regions. COMMERCIAL INVESTMENT REAL ESTATE O ur neighbor south of the border is investing in U.S. markets at a healthy pace, all while Mexico’s own economy continues to grow. The Mexican economy is the 15th largest in the world in nominal terms and the 11th largest by purchasing power parity, according to the International Monetary Fund. With the potential help of the United States-Mexico-Canada Agree- ment, this growth will continue. This offers opportunity to com- mercial real estate professionals both in Mexico and the U.S., says Guada- lupe Garcia, CCIM, PIC, occupier services director for Colliers Interna- tional in Mexico City. Garcia serves on CCIM’s International Activities Guadalupe Garcia, CCIM, PIC Committee and has more than 20 years of experience in commercial real estate in development, leasing, lease negotiation, financial analysis, operations, and marketing.

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