Eugenio González
CEO
Altea Desarrollos
/
Insight

Capitalizing on Small-Scale Developments

Tue, 11/01/2016 - 14:08

Mexico’s 760 shopping malls are a drop in the ocean compared to the 109,500 shopping centers in the US recorded by the International Council of Shopping Centers. Although Eugenio González, Director General of Altea Desarrollos concedes that Mexico’s goal is not to be on par with the US, he argues that improvement is less about numbers and more about distribution. “The focus on large cities like Mexico City and Guadalajara that have more than enough retail centers impairs the development of commercial real estate in other areas,” he says. “The main targets should be areas that are being left behind, such as low income neighborhoods in cities that lack development but have a thirst for more retail centers.”

Mexican franchises are struggling to develop at the same rate in these locations. “There are no incentives to invest in smaller towns when the investment costs the same and there are more sales opportunities in more urbanized regions,” González says. Altea is working with franchises to create strategies that make investments more attractive. So far, brands like Oxxo, Bodega Aurrera and Cinepolis are successfully positioning themselves in markets outside of large cities. “Any developer that creates a small or midsize retail center in areas without one instantly becomes king of the market for many years,” González says. “Shopping centers in these areas cost one-third of those in larger cities.”

The company opened a shopping center in Paseo La Fe, Nuevo Leon and used a variety of innovative technologies, including a polymineral roofing material called hefte that is made with German technology, making it highly efficient but also expensive. Hefte uses plastic cushions of air as a ceiling to allow natural light to enter freely and nourish the internal garden, while providing a 21° climate. “It costs three times more than traditional roofing materials but the results make it worthwhile,” González says. “Paseo La Fe is the sixth shopping center in the world to adopt this technology and the first one in the entire American continent to completely cover the roof with this material. The current price market may be a challenge for developers but companies like Postensa offer technology for concrete structures that are preconstructed, light, efficient and clean.” He believes that these technologies can be implemented across the board if the problem of misplaced capital in the industry resulting from misinterpreted consumer needs is resolved.

“Developers that work with Fibras or US funds are not using their own money and are less careful,” he says. “Many fail to place enough importance on the quality of the project and show more interest in spending money. Developers have to realize that markets are different in every city and building designs have to adapt to specific niches. A stronger effort is needed to gain a thorough understanding of end users.” Altea raises most of its capital through private funds, instead of Fibras or CKDs, allowing it to maintain close relationships with clients. Altea also differentiates itself by making decisions based on market preference and not on portfolio interest.

González believes the industry is challenging because the real estate market needs more square meters. The majority of land is no longer available so it is important to manage the remainder well. Still, he expects the number of commercial centers to double quickly. “A developer that only has experience with residential areas could work with us to build centers that combine both residential and commercial use facilities,” he says. “The trick is to find projects with added value.” He points to a partnership with Gicsa as an example. Altea located a piece of property next to one Gicsa was acquiring and the companies decided to create an alliance. Gicsa and Altea also have a common property in Playa del Carmen, with Altea owning the movie theater while the shopping center belongs to Gicsa.

Altea used to build houses but that market has followed the drop in oil prices, according to González, so the company is now focusing more on industrial parks. “The main issue is that investors are mainly looking for land and not projects,” he says. “We now have four industrial buildings and a plant. In one year, we expect to have four more buildings, each with an area of 10,000m2. We are also beginning two more industrial park projects in the locations with the highest demand in Nuevo Leon.”

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