The outlook for Mexico's real estate market in 2023

Mexico’s real estate sector could grow by up to 1% in 2023, and considerably more so in the 10 sub-markets where tourism is dominant.

That is according to Gene Towle, executive partner of Softec, a firm that is dedicated to real estate sector research.

In this interview, Towle also speaks about new projects, opportunities and other market trends.

BNamericas: What is the current outlook for the real estate sector, specifically for new projects? Let's start with housing.

Towle: In housing we have a somewhat contradictory situation because housing [contracts] continue but the start-up of housing projects has stopped. I think it has stopped because many people are concerned about the operational legal uncertainty in Mexico and so what we’ve been doing is running out of backlog. 

What we’re going to see is a continued contraction of the sector, although one in which developers start new projects. I hope they start happening next year. It’s a situation of a demand market, relatively stable and a market of supply by the developers in housing that is a little weak.

BNamericas: And commercial?

Towle: In commercial real estate, projects that were scheduled to start in 2020 were postponed until 2021.

BNamericas: And industrial?

Towle: One challenge with the industrial side is that there is demand for space but not enough cheap housing being built in these places. This occurs in markets where they have recently invested a lot: Monterrey [in Nuevo León state], Ciudad Juárez [Chihuahua], Tijuana [Baja California] and the Valley of Mexico. In the absence of cheap housing, there’s a limitation in the growth of industrial demand because there’s no place to house the workers.

BNamericas: Hospitality?

Towle: The fastest growing market is the vacation market, since this year it grew 15% and we estimate that next year it will grow 10-15%. The markets with the greatest movement are not necessarily where the new projects are starting, but they’re the ones that sell the most.

BNamericas: Which were the states with the most projects?

Towle: The biggest market in 2022 was the Valley of Mexico. We estimate that it had sales of 87.6bn pesos [about US$4.5bn]. It is followed by Cancún [in Quintana Roo] with 44.3bn, then Monterrey with 35.4bn, Guadalajara [Jalisco] with 28.9bn, the city of Querétaro in Querétaro state with 16.5bn, Puerto Vallarta in Jalisco with 15.7bn, Mérida [Yucatán] with 14.9bn, Mazatlán [Sinaloa] with 9.72bn, Tijuana 8.56bn and Los Cabos [Baja California Sur] with 8.44bn.

Those are the top 10 by market value.

BNamericas: What’s the outlook for 2023?

Towle: I believe that the economic scenarios that I’ve seen suggest that we’re going to have growth between -2% and +1%.

One of the great opportunities for Mexico is what is happening with the departure of so many companies from China.