The event, titled “What’s Next for Real Estate: A Conversation with Industry Leaders in Mexico”, engaged experts from several real estate sectors, including the hotel industry, office and commercial, housing, industrial, and retail and focused on the post-pandemic future of real estate.
The direction of the conversation was influenced by six surveys open to the public that included questions such as: "What's in store for sector due to the current contingency caused by COVID -19 in Mexico? Likewise, given the overwhelming levels of uncertainty surrounding not only the real estate markets but virtually every facet of the global economy, where does real-estate development in Mexico go from here?
The event generated stimulating dialogue, and some fascinating patterns emerged from the conversation. One interesting observation was that there was a clear alignment between the audience's appetite and the expert's opinions on where real-estate investment was trending. The audience voted, and the experts concurred, as follows:
1. Industrial real estate accounted for a whopping 55 per cent of votes,
2. Multi-family residential real estate carried 24 per cent of overall interest,
3. The hotel sector accounted for 14 per cent,
4. Retail development and malls accounted for five per cent,
5. And there was surprisingly only a two per cent appetite for the corporate office niche.
This is a very different composition from what would have been expected a mere six months ago, and is very telling of the uncertain times we find ourselves living in.
This mix is also revealing of a new reality: that manufacturing, infrastructure, and industrial real estate (real estate that taps into higher densities of local labour) are where the experts agree we need to look.
The second highest voted category (multi-family development) also makes sense, as accessible, affordable and reasonably dense multi-family housing would be required to support industrial development and the subsequent industrial economies within and around Mexico.
These two real-estate categories (industrial and multi-family) together account for almost 80 per cent of the trending interest in post-pandemic development in Mexico — and for a good reason.
While tourism has typically been a major economic driver in Mexico’s economy, COVID-19 has significantly paralyzed this industry and opened the door for other forms of capital investment in the country and region.
During the event, one of the experts pointed out that Mexico’s largely untapped competitive [industrial] advantage was 20 per cent cheaper door-to-door than China for practically all kinds of exports to the United States.
The ULI dialogue confirms what many of us already know, or at least suspect: that real estate developers need to adjust their expansion plans to rethink their product and offer a greater number of services and flexibility, and, above all else, develop adaptable work environments that reflect recent home office and flex space activity.
I propose that new real estate investment and development in Mexico should focus, now more than ever, on high-value innovation in mixed-use (residential, commercial & industrial) development that incorporate new advances in infrastructure technologies to create tomorrow's world.
The panelists agreed that there is a great opportunity for well-designed, well-executed multi-family developments that offer better levels of service than the informal rental market.
However, I propose that this is the time to strive to be even bolder.
Sitting at the intersection of climate change, a global economic meltdown and the COVID-19 pandemic, the optimistic approach would be to invest in the development of more organic, mixed-use real estate with a high concentration of culturally authentic multi-family housing. Moreover, this approach would include integrated and appropriately scaled retail and commercial development that serves the local grid, and innovative workforce and industrial development (focused on the production of high demand North American export products).
Now let’s imagine all of this gets held together by overarching patterns of ‘green’: urban agricultural farms that enhance and secure local food production; smart, adaptive streets that incorporate basic artificial intelligence algorithms to optimize multimodal traffic; localized micro-grids that generate clean, reliable local power; parks and open spaces that support mental and physical health; and an integrated greywater sequestering system that reduces the load on municipal sewer and water infrastructure.
I’d like to refer to this as ‘Resilient Development’.
Yes, the world will never be the same again. But even though it has changed forever, doesn’t mean we can’t still make it better.
Historically, the Mexican economy has been heavily reliant on tourism. Still, the panellists confirmed that both the hotel and the traditional retail sectors have had one of the worst performances in history this year. Not to mention, the expectation is that the level of investment in hotel and tourism in Mexico may continue to decline — at least over the short term.
Some of the world’s brightest thinkers, economists and investors have preached that ‘necessity is the mother of invention’. At a time like now, when uncertainty about the future of our economic and real-estate models is at an all-time high, we should re-imagine everything.
None of the ideas I have submitted here is new; the systems, technologies and infrastructure described have been tried and tested over many years now. It is, I think, time to seriously consider these ideas in the context of resilience. This may be the opportunity to 'leap-frog' the real-estate development models and create a far better world.
My goal in this article is simply to plant the seed of optimism and inspire innovative thinking about the current realities.
As discussed in the digital conference, there are some stark realities that developers and investors in Mexico must acknowledge. However, having said that, there are also clearly identified opportunities such as the export/trade value, and the foreign retirement real-estate market, to mention a few.
Therefore, the challenges to real estate developers in the current climate are, as pointed out by the panelists, very complex. Yet there is cautious optimism for a slow, but steady recovery.
Teams and organizations such as our alliance believe this ‘resilient recovery’ is one of a several necessary paths to revitalization in a world that will never be the same as it once was. We look forward to being part of the conversation and are poised to provide consulting that explores big ideas, minimizes risks, connects investors to projects, and collaborates to build development models unique to Mexico and Latin American opportunity.
Click here to check out the ULI Mexico on the digital conference.
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