Lyman Daniels
President
CBRE
/
View from the Top

Evolving Alongside the Real Estate Market

Wed, 11/01/2017 - 11:40

Q: Which of your services are in the highest demand?

A: Services that directly support institutional investors see the greatest demand. Mexico has changed from a real estate industry based on private parties owning real estate; there is now an exponentially greater number of Fibras and funds in this segmet. A public institution that owns real estate needs to be transparent, which is a requirement of shareholders. There can be no question as to the validity of the information provided to these stakeholders so the services we provide, such as validation of assets and facility property management, are a huge benefit for these institutions because it provides them transparency with their clients, tenants and investors. This is a trend that I believe will continue to gain traction in real estate.

Q: What are the biggest geographical trends for investors?

A: This depends on the investment. Almost 90 percent of overall institutional investment-grade office real estate is located in Mexico City. But industrial real estate is spread across the country. In the past five years, industrial has boomed in the Bajio region, supported by the automotive industry. There has been a lot of concern about the automotive industry in Mexico due to the political situation in the US and the renegotiation of NAFTA. Although I think there may be some impact, I am also skeptical about the extent to which this will impact Mexico. OEMs have spent billions of dollars to build plants and infrastructure in the country and that is the kind of investment they cannot just abandon. The industry will continue to have a presence but it will adjust to the current climate.

Q: What are tenants looking for and what constitutes a better product?

A: A big factor is location but not every location is adequate for a given user. A financial institution in Mexico City should be located on Reforma, whereas a law firm would prefer an area that is more central to clients, like Lomas. Many corporate users also have their own building in Santa Fe. Those are all promising markets but each one has its own individual characteristics that will drive that individual segment. We will see more buildings for rent because many developers are simultaneously racing to satisfy this huge demand. There is no problem with supply or demand, although the supply side will
see a bigger surplus over the next few years as the demand side catches up to the new developments that are appearing.
Excluding any unforeseen circumstances, I do not predict that demand will drop significantly over the next few years. 209

Q: What impact are millennials having on market trends?

A: Any company or professional that is ignoring or overlooking millennials is being myopic because this generation will change the way we work. We tend to group technology and new forms of communication with millennials and this creates a new approach to work. In our offices in Mexico City, we have taken this into account. I have no assigned office or desk and when I come to the office in the morning, I take my computer from a locker, log into a telephone at any desk in the office and work there. Technology and, by extension, millennials are changing the workplace and we are also adopting this approach with our clients. We are showing them innovative ways to work, using a higher degree of technology, which can offer higher returns. The people who are most closed off to embracing this are those who are furthest from this age group. But a company that understands how to think young will be able to adapt, whereas those that are less flexible will take a little longer to get there.

Q: What other commercial trends have you identified in the office market?

A: We have seen a surge in multiuse developments that incorporate not only office space but also a retail component or a residential component. This is because people would rather eliminate time spent in traffic and this is only intensified in a city that is as congested as Mexico City. These are more difficult to develop but if they are done correctly, they become iconic. This means that they become the center of a community rather than just another office building or mall. The Soumaya museum is an example of this.