Mexico’s origins date to the pre-Hispanic Aztec culture, which established itself in the region around 1325. The greater Mexico City area became the cradle of Hispanic colonization of the Americas in 1510. Since then, the region has become the largest conglomeration of population in the Western Hemisphere with 21.2 million people today. At its lowest point, Mexico City sits at 7,200 feet above sea level in a valley in Central Mexico surrounded by mountains and three volcanoes, one of them still active. With close to US$500 billion in GDP, Mexico City represents more than one-fifth of the country’s total GDP.
Mexico City also serves as the country’s financial center and seat of central government. If Mexico City were a stand-alone country, it would rank as the fourth-largest economy in Latin America, based on 2014 statistics. The city’s economy is more than five times as large of Costa Rica’s economy and about the same size as Peru's.
The greater Mexico City area comprises 10 submarkets totaling 50.5 million square feet (msf) of class A and A-plus office space. The Santa Fe submarket, located to the west of the city, represents about 25% of the total market inventory. Together with the Insurgentes and the central business district submarkets of Polanco, Reforma and Reforma-Lomas, Santa Fe is the preferred location for multinational corporations and Mexican companies with a national presence. An additional 15 msf will be added to the inventory by 2018.
Due to the city’s high employment and income levels, the retail sector has expanded steadily over the past 10 years. Mexico City has attracted increasing numbers of American and European retailers with space that, until the 1990s, ranked well below other cities in the Americas in retail area per inhabitant. In coming years, the Mexico City retail market will continue to witness the expansion of new retail centers of all types. New brands and chains will also enter the Mexican market, and it is quite likely that Mexico City will be the home of their anchor stores.
Mexico City has transformed from a production location 20 years ago to a logistics and distribution hub. With roughly 79 million sf feet of class A industrial space, greater Mexico City area industrial vacancy is at one of its lowest points in the past decade. Land availability and a complicated permitting process are the biggest challenges for large industrial developers. Currently, however, there is 9.5 msf under development, which will take the total inventory to more than 88 msf in the next 24 months.
Institutional investors – notably FIBRAS (the Mexican equivalent of the REITS), along with local and foreign private investors, have invested billions of dollars and continue to be attracted to Mexico City as they search for quality and stable commercial real estate assets, which have become scarce in a market where many of the established participants are reluctant to sell. This combination has driven cap rates to their lowest levels since the 2008 financial crisis.
Avison Young’s Mexico City team consists of real estate experts who are seasoned in the areas of tenant representation, acquisitions and dispositions, agency, and project and facility management, among other services.
The Mexico City office was opened in November of 2015 in order to fully service the entire North American market, and works with the firm’s U.S. and Canadian teams in cross-border projects.