By Isabella Ortega
On Monday June 14, Giancarlo Nicastro, CEO of SiiLA Brasil, and José Carlos Alemán, CEO of SiiLA Mexico, participated in a webinar led by JP Morgan, addressing trends for the commercial real estate markets in Brazil and Mexico.
Alemán opened the debate by presenting macroeconomic indicators from the Mexican and Brazilian markets, which have significant disparities, especially in terms of population – Mexico has almost half of the entire Brazilian population and less than half in terms of unemployment rates. In Mexico, the current rate is at 4.4%, while the number of unemployed in Brazil reaches 14.7%.
"Another interesting metric is the interest rate for both economies. Since the pandemic started, we’ve had consecutive interest rate cuts in both countries, with a current 4% rate in Mexico and 3.5% in the case of the Brazilian Selic", said the CEO of SiiLA Mexico. Financial market players and Mexican economists believe the inflation rate will reach nearly 3% by the end of this year, which is Mexico's Central Banks’ target," he added.
Nicastro pointed out that the vacancy rate for A+ and A class offices in the CBD region (Central Business District) of São Paulo continues to grow, reaching 21.2% in the first quarter of 2021. "It’s clear to us that widespread access to vaccinations will be the most important driver to reverse this trend.", he said. The CEO of SiiLA Brasil also noted that many companies take advantage of market conditions to make good deals, move their headquarters or operations to other regions, and negotiate better prices.
Meanwhile, Mexico registered a 14.6% vacancy rate in the first quarter of the year, considering only A+ and A classes in Mexico City - CBD. According to Nicastro, the impact of the pandemic was similar in both countries. The big difference between the Mexican and Brazilian markets was the amount of new stock delivered to the Chucri Zaidan region, in São Paulo.
"The industries of office tenants are also similar when we analyze the Mexican and Brazilian markets, with the financial sector accounting for most of the occupation. This industry has slowed down in the volume of leased area and occupied meters in recent quarters," added Alemán. SiiLA Mexico's CEO highlighted that coworking spaces have been expanding aggressively and account as the second largest segment in terms of occupied meters, especially after a strong leasing spree that occurred in Mexico City between 2017 and 2018.
"We remain optimistic that with the recovery of the economy and the roll-out of the vaccines; vacancy rates will drop quickly in Brazil", said SiiLA Brasil’s CEO, adding that many companies that had closed offices to cut expenses during the the peak of the pandemic are returning and looking for new spaces for their operations. "Companies are realizing that their headquarters are necessary; they need to bring people together, share ideas and values."
The industrial segment is going cycle than the office market. In Brazil, Nicastro noted , although the vacancy rate is on a downward trend, the asking price remains stable, hovering around $3 dollars a square meter with today’s exchange rate.
In Mexico, both the vacancy asking price trends are stable. "We’ve had a huge growth in e-commerce in the year 2020, with companies like Amazon and Mercado Libre doubling the space occupied in Mexico City alone", highlighted Alemán. Although the commercial real estate segment has proven resilient, the CEO of SiiLA Mexico mentioned that the main challenges are the saturation of markets, such as in the Tijuana region, and the fragile power grid infrastructure to support the development of other regions.