Background on the Mexico City Real Estate Investment Decline
Historically, the Mexico City (CDMX) real estate investment sector has experienced a significant decline, with investments shifting to more attractive regions across Mexico. According to the Asociación de Desarrolladores Inmobiliarios (ADI), 80% of investments from their members were concentrated in the capital a few years ago. However, this figure has now dropped to just 20%.
Reasons for the Shift
María José Fernández Ros, the General Director of ADI, explained that several factors have contributed to this decline. One major reason is the delay in granting building permits and licenses, which has negatively impacted investor confidence.
“Investors viewed this unfavorably, as projects adhering to all legal requirements took three to four years to obtain necessary permits and licenses. Consequently, they sought alternative markets,” Fernández Ros stated during a forum for real estate sharks.
ADI and Current Investment Projections
The ADI currently comprises 78 companies projecting an investment of $15 billion by 2025. Together, they generate 350,000 annual jobs and impact 48 sectors of the real estate industry.
Regulatory Concerns and Uncertainty
Fernández Ros highlighted that proposed regulations in Mexico City, such as rent caps or the Bando 1 strategy aimed at mitigating gentrification effects, have created uncertainty among developers.
“It is well-known that many countries have attempted to implement frozen rents, resulting in a contrary effect where rents decreased, and properties were abandoned,” she noted.
Principal Issue: Housing Supply Shortage
The primary concern, according to Fernández Ros, is the shortage of housing supply, which has been affected by challenges in habitational development within Mexico City.
“Once construction facilitations are in place, the rental and sales markets will balance out,” she emphasized.
Rise of Tourism and Industrial Regions
In this context, real estate investment has started to gravitate towards tourism and industrial poles, which have emerged as the new driving forces of the sector.
- Tourism: Investments in tourist destinations such as Baja California Norte and Sur, Riviera Nayarit, Riviera Maya in Quintana Roo, Yucatán, and the Bajío now account for nearly 31% of total projects.
- Industrial Development: Although there has been a slowdown following the nearshoring boom, the industrial development segment remains promising for investors. Fernández Ros also pointed to the recovery of the shopping mall sector post-pandemic, with occupancy rates at 93%.
Housing Development Challenges and Opportunities
Fernández Ros acknowledged that inventory and slow permit processing remain challenges in housing development, but there are opportunities within the rental segment and government-backed programs.
“There are several ongoing housing rental projects; medium and residential housing still offer opportunities. We must capitalize on government initiatives, such as Infonavit’s social interest housing opportunities, which are crucial for our country,” she stated.
