There is insufficient capital to develop housing for workers that incoming companies will require.
Nearshoring has brought some very successful investment to Mexico, however, there is a need for more capital and developers to build housing for workers that the industry is demanding.
“Affordable housing should be at the top of the nearshoring agenda. We are currently working with one of the biggest car manufacturers in the world located in Pesquería, Nuevo León. They came to Mexico about seven years ago and employ 14,000 people, but face a sizable challenge: they spend around MXN150 million transporting their workers to and from the plant as there is no housing in the area. Incoming companies require that workers live close to the plants and do not have to face a two-hour commute to get to work. This is absolutely critical, nearshoring strategies must contemplate affordable housing for their workers,” says Mr. Víctor Rosales, director of Yavo Capital and counselor for the Nearshoring Committee at the Business Coordinating Council (CCE in Spanish).
Mr. Rosales, who is also a real estate business man and sustainability advocate, believes there is a need for more financial players, more agile licensing processes and entrepreneurs who wish to innovate and invest in housing developments.
“Mexico is in a position to absorb all kinds of housing, from affordable housing to luxury residences; we currently require close to a million new homes a year, and we are only building 70,000 (only eight per cent of what is required). However, the population is growing at a rate of 150,000 newcomers who join the formal job market and could potentially have access to a mortgage, and we are not even providing for this demographic bonus,” points out Mr. Víctor Rosales.
He also adds that Mexico requires affordable housing, approximately five million new homes. “People want to become homeowners, but simply cannot afford to do it. We require new credit schemes and access to more loans. I have always thought there is quite a lot to be done in this sector, which by the way, activates the entire economy. A single mortgage activates 72 branches of the economy, according to data from the National Institute of Statistics and Geography (INEGI in Spanish).”
“Mexico is in a position to absorb all kinds of housing, from affordable housing to luxury residences; we currently require close to a million new homes a year, and we are only building 70,000 (only eight per cent of what is required).” Víctor Rosales, director of Yavo Capital.
Mr. Alejandro García del Río, Marketing and Commercial director of Inmuebles24, believes that nearshoring is a tremendous opportunity for Mexico’s development, not only in terms of innovation, but also in terms of investment. “It is expected that new companies will come to different parts of the country, and naturally there will be more demand for housing in those areas. Apodaca, Nuevo León, has 23 industrial parks and it concentrates the highest number of exporting manufacturing plants in the state, according to the Employers Confederation of the Mexican Republic (COPARMEX in Spanish). On the other hand, Santa Catarina, where the new Tesla factory will be located, is becoming an increasingly attractive market for real estate as it is expected that Tesla will create 5,000 direct jobs and 30,000 indirect jobs, according to state government predictions.”
Moreover, Mr. García del Río mentions that nearshoring will bring demand mostly for affordable housing. “I mention Nuevo León as one of the states that is attracting nearshoring, but there are others, border states like Chihuahua or Baja California are also attracting nearshoring because of their manufacturing tradition. Querétaro and Jalisco in the Bajío and Yucatán in the south are also attractive destinations because of their existing industrial clusters.”
In terms of housing for company executives that come to Mexico, Mr. Andrés Martínez, CMO of Grupo Financiero GFA, says that the current scenario is a great opportunity. “We have seen investors who buy two or even three properties. It is a very specific profile, company executives who travel for a few days for business and use one of their properties to rest. GFA is a luxury real estate developer that has been on the market for 60 years and we are behind the projects The Landmark Reserve and The Landmark Guadalajara. We offer loft apartments which are designed for people who travel a lot and only stay for one or two nights to rest. We also offer three-bedroom apartments of up to 300 square meters for those executives who seek to move to Mexico and bring their families.”
Mr. Martínez declares that both, affordable housing and luxury developments, represent a huge opportunity for real estate developers in Mexico. “Mexico is now able to offer concepts that in the past were only available in Miami or Europe. Cities like Guadalajara have been attracting investors from Canada, Europe and the US. And this is just an example of what is going on in other parts of the country; the exchange rate has also been having a positive effect, making it a great opportunity to invest in Mexico. Likewise, industrial development will increase demand for affordable housing. People must live close to the workplace to have a better quality of life, and also for safety reasons.”
“It is expected that new companies will come to different parts of the country, and naturally there will be more demand for housing in those areas.” Alejandro García del Río, Marketing and Commercial director of Inmuebles24.
Mexican cities which are attractive for the housing market
There is an increased housing demand across Mexico, particularly in the north and southeast.
“There is a huge demand for housing all over Mexico, but even more so in the southeast of the country because these states have been the most neglected. Yucatán is growing a lot and house prices are on the rise, although not at the same level as in more developed states. Nuevo León, which is one of the most industrialized states in Mexico, presents a lot of housing demand, but also has plenty of supply. The cost of land is a bit higher in the north and therefore houses are more expensive, but still accessible,” says Mr. Víctor Rosales.
Mr. Rosales mentions that Nuevo León, Baja California Sur, Yucatán, Chiapas and Oaxaca are working on developing affordable housing for the broader population.
Mr. García del Río says that according to data from the Inmuebles24 site, Mexico City has the highest number of searches for housing, followed by Jalisco, Estado de México, Nuevo León, Querétaro, Yucatán, Quintana Roo, Morelos, Puebla and Veracruz.
“All kinds of homes are needed across different areas. For example, Yucatán and Querétaro are experiencing high demand for housing as these are states that offer excellent quality of life, good services and are experiencing either industrial development (Querétaro, Nuevo León and Jalisco) or tourist development (Yucatán and Quintana Roo). There are states like Quintana Roo that generated interest for luxury developments, even during the pandemic,” points out the Marketing and Commercial director of Inmuebles24.
According to data from Inmuebles24, 67.3 per cent of searches are for rental properties. “Based on the supply and demand law, searches for all kinds of housing should increase,” adds Mr. García del Río.
In terms of luxury developments, the CMO of Grupo Financiero GFA, says that the areas which are growing the most are Los Cabos, Tijuana, Chihuahua, Monterrey, Querétaro, Guadalajara, Tulum, Riviera Maya and Mexico City. “Approximately 30 per cent of the investors we have in our portfolio come from abroad. The lifestyle of Americans and Canadians is changing. They come to Mexico because the weather and the culture make it a very attractive place to live. The Landmark Reserve has become an icon in the city because of its architectural concept. I do not have an exact figure, but I can say that the premium market in 2023 is around 40 per cent up from last year.”
Mr. Martínez believes that the growth of the premium segment in 2024 will be similar to this year’s. “The capital gain is estimated to be at least 30 per cent. Sales demand in the sector can be affected by several factors. Owning a property in a luxury development is a fantastic investment opportunity.”
Finally, the CMO mentions that Grupo Financiero GFA chose Zapopan to develop the project The Landmark Reserve and The Landmark Guadalajara because Jalisco has positioned itself as a nearshoring leader and it is a very attractive destination for companies that are relocating to the region. We are ready to welcome those who seek a better place to live and want to run their businesses from this new entrepreneurial hub. We believe the area will present high capital gains. The new tower of The Landmark Reserve development will be ready in October this year.”
“We have seen investors who buy two or even three properties. It is a very specific profile, company executives who travel for a few days for business and use one of their properties to rest.” Andrés Martínez, CMO of Grupo Financiero GFA.
