Building Smaller to Diversify in the Residential SegmentThu, 11/01/2018 - 10:11
Q: What regions of Mexico and which new segments are attractive for Grupo LAR?
A: We concentrate our developments mainly in the State of Mexico and Mexico City. Around 95 percent of the investments in our product are focused on this region. The capacities necessary to succeed in the residential markets of Mexico City and the State of Mexico are different from those in other regions of the country, so we focus on the areas where we excel. Rather than developing in new areas, Grupo LAR is interested in venturing into new price segments of the residential market in these states. Having said that, there are some plans to invest outside of Mexico City and the State of Mexico, but these kinds of investments must be substantial to make sense. The average price of our in-stock residential units is MX$5.5 million but we want to enter less expensive segments. The majority of the investment projects that Grupo LAR is analyzing and about to close focus on offering residences at prices of MX$2.5-$4 million because this market is underserved. We are not interested in substituting luxury residences for more inexpensive housing but in complementing our offering with products that cater to other purchasing powers. Grupo LAR will develop less costly residential projects in areas of the Valley of Mexico where it has not invested before, which makes more sense than trying to maintain our offering of more expensive residences in new areas.
Q: Where in the Valley of Mexico is Grupo LAR planning to develop to target these new segments?
A: The area between the peripheral ring and Punta Norte in northern Mexico City offers a large opportunity where it is possible to invest and where there is a market for MX$2.5 million residences. The Azcapotzalco borough is also attractive but this area presents challenges of water shortages and building restrictions, so we would need to manage projects in a special way there. The Iztacalco and Iztapalapa boroughs in eastern Mexico City have everything that Grupo LAR looks for in terms of demand in our target price segments.
Q: What projects in the luxury residential segment does Grupo LAR have in its pipeline?
A: Our residential offering for the top-price segment has been concentrated in the Bosque Real area in Huixquilucan, State of Mexico, ever since we purchased land in this area in 2016. We are launching a variety of residences ranging from 100m2 to 520m2 there. Grupo LAR is excited to develop in Bosque Real because it is one of the last green lungs of Mexico City and the prices per square meter and per unit are highly competitive compared to similar residences in other areas. We have enough land to build around 2,800 residential units, so there is more than enough space to develop for a long time in several phases. Our main target for these products is young people and families who have the purchasing power to acquire larger residences. Grupo LAR is also developing houses in the top-price segment in Moncayo in Atizapan, State of Mexico, but the most important investments in this segment are concentrated in Bosque Real.
Q: How has Grupo LAR evolved to cater to the increasing demand for amenities in residential developments?
A: In Mexico, consumer prices have increased but the purchasing power of people has stagnated. This prompts developers to build smaller apartments so the price of a unit does not increase as much as the price per square meter does. Smaller apartments push families to spend time together in spaces outside of their homes. This incentivizes Grupo LAR to add more amenities in its residential developments, which is possible thanks to the size of the projects. Building a 250-unit development offers few opportunities to offer many amenities as the size does not allow it. We are a company that has few but sizable investments and size is an important factor for Grupo LAR’s success. The company aims to build residential developments that have at least 1,000 residential units. By making large investments, we reduce our dependence on market cycles and more effectively generate and consolidate value in an area.