Investors Targeting Mexico Real Estate

Investors Targeting Mexico Real Estate

Commercial News » Latin America Commercial News Edition | By WPJ Staff | May 29, 2013 2:25 PM ET

A flurry of recent deals has signaled renewed investor interest in Mexico's commercial real estate market.

Investors are betting the country's real estate market will get a boost from President Nieto's economic reforms and the introduction of REITs, which could fuel demand for offices, hotels and shopping malls, according to the Financial Times, in an article headlined, "Mexico's red hot real estate market."

Planigrupo Management, a Mexican invest fund specializing in commercial real estate, acquired nine shopping malls for $255 million last week, the Financial Times reports. The fund bought another shopping center in the city of Monterrey for $31 million last November, reports FT. 

The real estate market has experienced an influx of capital since the introduction of REITs in 2011, offering investors a new vehicle to access the property market. Since REITs began trading, financial firms have raised $4.6 billion from local and foreign investors, the FT reports.

The international activity in property is a contrast to signs of a slowdown in the overall Mexican economy. After a big run-up in 2012, the rate of foreign investment in Mexican stocks fell by almost 50 percent in the first quarter of 2013, according to central bank data.

But there has been no slowdown in property deals, which often involve international capital. 

Canadian real estate company Reichman International recently partnered up with REIT Fibra Uno to invest $165 million in a 33-story office and commercial tower in Mexico City known as Torre Diana. It will be meters away from Mexico's tallest building, the 55-story Torre Mayor.
Yet, some analysts remain wary of Mexico, concerned too many players are chasing deals. 
"It is a limited pool of assets they can go after, so the (capitalization) rates will definitely be coming down," BlackRock's Latin American fund manager, Will Landers, told Reuters.

Commercial real estate is not the only sector attracting attention. The Mexican government has also taken historic steps to change rules for foreigners buying residential property in coastal areas, increasing investor interest. 

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