Assessing Real Estate Value Amid Political Uncertainty

Q: How does JLL support Mexico’s real estate market? How do its services benefit local clients?

A: JLL, formerly known as Jones Lang LaSalle, is a global company dedicated to real estate analysis, treatment, and transaction. The Value & Risk Advisory area that I head carries out the assessments and feasibility studies that developers, owners and lenders rely on to make decisions regarding what can be done with properties. Our activity is divided into two main areas: valuation of properties and carrying out of special studies which are predominantly  market feasibility and highest and best use analyses, and are highly linked and related.

The purpose of the market feasibility study is to analyze the viability of an existing property or a  proposed project, considering both market and financial elements. In this way, we can establish favorable or unfavorable conditions for the behavior of the property or the construction of the project. Our work applies not only to those who have land or property, but also to those who wish to find the optimal site to set up a project. 

Q: What would be your recommendations for those affected by Hurricane Otis in Acapulco to help them make the best decision about their damaged properties?

A: Unfortunately, this decision is not limited solely to technical aspects, whether from a construction or market point of view. It also depends largely on the insurance of the properties. Properties that were adequately insured will have the resources to rebuild, but many owners were not properly insured. Acapulco was mainly characterized by a seismic risk, so many properties were adequately insured against earthquakes, but not hurricanes. 

In some cases, we have recommended the complete demolition of buildings and construction from scratch, which allows the client to recover and even improve their business and image through the market projection we generate. In other cases, complete demolition is not justified and a reconstruction with improvements is the best option. We also have recommended the reconversion to another use, such as changing from purely hotel use to mixed use. These are the types of situations that highlight the importance of feasibility studies.

Q: How does JLL México plan to cater to the increase in demand brought about by nearshoring?

A: We act on different fronts. The area I direct carries out studies for owners or developers interested in investing in suitable sites to build industrial warehouses or industrial parks, given the great demand for industrial spaces. JLL México’s industrial area specializes in offering options for land acquisition, helping to carry out the purchase and sale. The industrial and transaction areas are responsible for connecting land owners with those looking for a property, facilitating the transaction between both parties.

The Property Development Services (PDS) area is responsible for managing and coordinating major projects and recommends the most appropriate conditions for the distribution of spaces within the property, among other important aspects. It is a completely integrated chain that goes from the analysis to the delivery of the property in operational conditions, with all the appropriate equipment, furniture, and finishes. 

Q: What makes Mexico an attractive destination for real estate investment, and how is JLL México positioning itself to capitalize on these opportunities?

A: JLL México is taking advantage of the country’s particular circumstances. Nearshoring is generating development in other sectors. The large industrial demand requires more houses, schools, and transportation. Inside JLL we have a residential direction which is responsible for obtaining properties for those who need it. We also have a solid and robust hotel direction that conducts transactions and analyzes potential sites to build hotels. 

However, if the government does not participate in the creation of sufficient infrastructure, it will not be possible to advance to the expected levels of development. Two points in particular are of constant concern: energy and water. Energy and water services are extremely important due to the demand, and it is the government's responsibility to provide and grant facilities to enhance supplies.

Q: From a real estate perspective, what are some of the key risks and challenges that investors should consider when operating in Mexico?  

A: Mexico is at a political crossroad. The path that Mexico takes in the coming years will be fundamental for its development. The government will have to work hand in hand with the private sector to give the country the resources and infrastructure it needs. This will generate jobs, which is crucial to stabilize and improve the living conditions of the population.

There is also an exchange rate risk, which has been affecting those, like us,  who provide service abroad. The exchange rate has affected us, since our costs are in pesos but sales are in foreign currency. Another risk is for Mexico to maintain its independent institutions. When we perform future projections we consider these important elements, among others, when we establish the risk conditions. 

Q: What is JLL Mexico's assessment of Mexico’s financial outlook, particularly in the context of recent economic trends?

A: Mexico must continue to be an attractive country for investment. The incoming government will likely need to provide guarantees and stability so that investment continues to flow. We want to see Mexico with an optimistic lens and hope to continue moving forward. It is important to understand that job creation comes largely from private sector investment. The government does not always have the resources or experience necessary to invest in all sectors. This does not mean that there should not be a clear direction from the state, but that adequate collaboration between the public and private sectors is required to carry out the investments that Mexico needs.

Q: How does JLL México envision its role in driving innovation and growth in the real estate sector in Mexico in the coming years?

A: Our valuation segment grew 15% annually from 2022 to 2023. Our main offices have increased our goal by another 15%, and we are confident of achieving a satisfactory result within that new objective. However, growth should not be viewed solely from a quantitative perspective; qualitative growth is equally important. We are also focusing on education and staff training, as we have many talented young people who are bringing new ideas and energy. This will undoubtedly drive growth. We anticipate that 2024 will be a good year for us, despite any challenges that may arise.

JLL is a global professional services firm that specializes in real estate and investment management. It shapes the future of real estate by using technology to create sustainable real estate solutions.