Data and Information to Withstand Uncertain Times

Commercial real estate by the end of 2020 fourth quarter

By: SiiLA México

How can we talk about 2020 without mentioning the word COVID-19? The changes and uncertainty since the beginning of the pandemic, have intensified the need for accurate, constantly updated and verified information. The access to this data gives us the opportunity for better decision making, investments, forecasting and planning.

Accordingly, SiiLA Mexico presents some of the results of office, industrial and retail assets of the fourth quarter of 2020.

Currently, SiiLA Mexico monitors 96 submarkets and more than 9 thousand properties in the country, adding to a total of 66 million sqm.

For Retail asset, 127 properties are monitored: from “neighborhood centers” to “super regional malls”, totaling 4.7 million sqm in the markets of Monterrey, Guadalajara and Mexico City.

By the end of the fourth quarter of 2020, these three markets reported an average occupancy rate of 92%. This translates to 2,703 available establishments (383 thousand sqm) of the kiosk, mini and small types. These spaces were cleared out since the second quarter, due to quarantine and other health and security measures implemented because of the pandemic.

Despite the uncertainty for this sector, among the observed properties, 190 establishments were occupied by different brands.

Concerning the office asset, SiiLA Mexico monitors more than 8.9 million sqm in 26 submarkets, located in 4 markets: Guadalajara, Queretaro, Monterrey and Mexico City. This has been one of the most affected assets during the health crisis, due to the companies need to adapt to remote work.

In addition, for Mexico City, approximately 420 thousand sqm went vacant, representing an increase of 243% more sqm compared to those registered as vacant during 2019. The remaining markets presented a similar situation with vacancy rates of 19% for Queretaro, due to a new delivery of 13 thousand sqm; in Monterrey, the vacancy rate was of 15% that, during the second quarter of 2020, increased due to the delivery of Torres Obispado and stabilized by the end of the year; in Guadalajara, the vacancy rate was of 22%, due to two new deliveries that increased inventory by 33 thousand sqm.

The industries with the largest footprint (in sqm) of office spaces in the observed markets belong to the financial, government and coworking industries. In the last quarter, 120 thousand sqm were renovated in leasing contracts in Mexico City. It is also worth noting that, based on the results of the market and capital market statistics of 2020, it can be concluded that the Net Operating Income (NOI) for A+ properties in the CBD decreased 10% by the end of the year.

Meanwhile, the industrial asset continues to offer steady and attractive indicators for investment. SiiLA Mexico, observed 43 main submarkets and 3,958 properties distributed through more than 53 million sqm.

This asset has been the most resilient during the ongoing crisis, showing healthy vacancy rates, the lowest belonging to the Tijuana market with 2.55% and the highest in the Queretaro market with 6.34%, due to the delivery of Parque Industrial KAIZEN with a total of 80 thousand sqm.

During the fourth quarter of 2020, the industries that occupied more sqm for this asset were: vehicles and parts, capital goods, transports and logistics. Furthermore, the e-commerce industry increased 150% from the second quarter of 2019 to the fourth quarter of 2020, occupying more than 400 thousand sqm.

Despite the unusual circumstances, SiiLA México witnesses a great resilience in the industrial asset, which closed the fourth quarter with a 96% occupancy rate.

Nonetheless, we must keep up to date on the commercial real estate adjustments for the following conditions: reconfiguration and association to e-commerce with the arrival of delivery lockers of big players such as Amazon and Mercado Libre to shopping centers in the retail asset, as well as the renewal of office leasing contracts from important tenants like AT&T.

Without a doubt, 2021 will be a key year for the recovery of the sector, even if some will likely take longer than others, they will overcome the current situation eventually, if we remain prepared, informed and receptive to the cyclic nature of these sectors.

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