Mexico’s real estate sector benefits from global relocation trends, according to Fitch.
Fitch Ratings’ recent analysis suggests a positive outlook for Mexico’s commercial real estate sector.
This is due to global value chains relocating to Mexico, incentivized by its closeness to the US.
The firm’s report revealed that several Fitch-rated issuers ramped their capital expenditure and investments in industrial spaces.
This move will capitalize on the heightened demand from multinationals for storage, manufacturing, and other infrastructure.
The first quarter of the year saw a 48% year-on-year increase in FDI to Mexico.
The government has also earmarked investment projects totaling US$48 billion, with US$30 billion planned for 2023.
However, local firms in Mexico are expected to face challenges.
While robust demand will lead to higher occupancy rates and rents, firms must balance expansion with the global economic downturn.
Moreover, multinationals are actively acquiring and developing new industrial properties in Mexico.
This is in a bid to leverage the robust fundamentals of the Mexican real estate market.
Mexico’s economy experienced a 3.0% growth in 2022, making it the second-largest in Latin America after Brazil.
However, Banxico’s private analysts predict growth of 2.50% in 2023 and 1.50% in 2024, considering the anticipated deceleration in the US.
Various factors have driven the relocation of global value chains to Mexico.
Mexico is geographically close to the US, offers a cost-competitive labor force, and has established trade agreements facilitating international business.
Additionally, the Mexican government has proactively identified and supported investment projects.
This includes infrastructure development and improvements in business-friendly policies, which have attracted foreign investment.
Nonetheless, while the demand for commercial real estate is increasing, local firms must navigate challenges.
The global economic downturn impacts Mexico and the world, affecting trade, investment, and market confidence.