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Boston, MA -- (SBWIRE) -- 08/16/2012 -- It appears that there has been little major new activity in the Mexican real estate market during Q212. The likely reason for this is the upcoming presidential elections on July 1 2012. These mark the first elections since the global recession, and may provide opportunities in a new administration's policies. Reports suggest that Mexico is poised for a recovery in growth no matter the outcome of the election.
In our most recent round of in-country interviews, conducted in December 2011, commercial rental growth in Mexico had been fairly stagnant, particularly in the office and retail sub-sectors. Industrial rental growth was a little more promising throughout 2011 in Tijuana, Guadalajara and Monterrey, but mirrored the other two markets in Mexico City. Minimal growth in rents is expected in 2012, amid a continued slowdown in the US that has increased caution among international investors.
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Previously, we raised our forecast for Mexico's GDP growth in 2012 to 3.4%, above consensus. On the back of strong domestic demand and rising investment inflows, our scenario seems to be playing out. Commercial and manufacturing data in particular are surprising to the upside, which provides a steady base from which real estate investment can grow. However, the country remains vulnerable to external shocks, particularly in the form of a protracted slowdown in the US.
Key Opportunities In The Real Estate Market:
- cThe country's proximity to the US could prove to be an opportunity or a risk for Mexico. Our GDP growth outlook is favourable compared to the US, which may encourage investors looking for more stable markets into the country's real estate.
- Mexico's own REIT, Fibra Uno, started trading in March 2011 and by August had 675,917m2 of gross leasable area in its Mexican portfolio, across 16 properties, with 90% occupancy. The largest proportion of the property is industrial space.
- Automotive production remains a promising market for Mexico, which in turn should keep industrial investment and rental growth robust in the face of any caution from the US.
- Cushman & Wakefield has reported that the Americas are likely to lead a recovery in property investment in H212, and highlights the prime opportunities in Mexico's office, retail and industrial markets.
Key Risks To The Real Estate Market:
- Over-supply of office space, particularly in Mexico City, may continue to depress rents there and dissuade developers from building higher-quality properties.
- Rental growth has been minimal at best in the past year, and while growth is currently expected in 2012, the overall real estate market remains subdued.
- In the short term, a potential slowdown in activity in the run-up to July's presidential elections may present a downside risk to rental movement. However, this should pick up once the new administration takes office.
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