Enrique Villanueva
Development Director at Pulso Inmobiliario

High Land Costs Shaping Development Trends

Thu, 11/01/2018 - 09:20

Dense cities offer a great market for new projects but gathering parcels of land large enough and in the right location is growing more difficult each year, says Enrique Villanueva, Development Director of developer Pulso Inmobiliario. “Acquiring the land for a project is no easy feat,” he says. “Buying land piece by piece can take quite some time, as it involves making decisions about the development location and carrying out various market studies, and Pulso Inmobiliario is a specialist in these matters.” He emphasizes that choosing the right location necessitates long-term planning and creativity.
The cost of land, especially in cities such as Mexico City, Guadalajara, Monterrey, Cancun and Puebla, is climbing rapidly as these are some of the most attractive cities for mixed-use developments. Pulso Inmobiliario’s newest project, Encuentro Oceania, located close to AICM, is a good example of choosing a strategic location. “Oceania Avenue is a great location because there are no shopping malls of its size in the area,” Villanueva says. “Although there are many stores and services, there are no mixed-use developments with large anchor stores or entertainment centers.”
Villanueva says that, after analyzing the demand, developers should make sure that the terrain is appropriate for the project in terms of licenses and permits. Encuentro Oceania will be developed on land that was once home to a large factory. “This meant we did not have to purchase many parcels of land and negotiate each one and even though we do have to change the land use permits, it is easier to change from industrial to commercial than any other type,” he says.
But not all Pulso Inmobilario’s developments have gone so smoothly. In the case of Torre Manacar, the developer began by purchasing the Manacar Urban Center, which was a mall with offices that took up half the block. As the project grew and became more ambitious, the company continued purchasing surrounding parcels of land. In total, Pulso Inmobilario bought 11 parcels, each negotiated individually. “Negotiation is difficult because one cannot negotiate in bulk,” he says. “There are people who want to sell right away and others who may want to take advantage of the situation to drive the price up.” Pulso Inmobiliario hires various brokers to knock on all doors and negotiate each case on its behalf.
Creativity and thinking ahead could save developers hassle and money later, according to Villanueva. Pulso Inmobiliario will build a new skyscraper on Reforma in collaboration with another important developer. The project, Impera, will be built on a plot of land that only this JV could develop, he says. “This parcel had been on the market for years, not because it was not attractive, but because it was extremely difficult to build a project there due to new parking regulations,” says Villanueva. He explains that even though new regulations in Mexico City reduced parking-space requirements, developers must still offer their clients a certain number of spaces. The terrain’s size only permitted four to five parking basements because any more would be extremely expensive given the type of ground. The ramps themselves would take up most of the terrain, making it almost impossible to integrate parking into the project.
Facing this parcel is the New York Life building, another of Pulso Inmobiliario’s projects that encountered a similar challenge. To provide enough parking for the towers, the developer purchased various pieces of land on a street located approximately 100m away. “Mexico City regulations allow for satellite parking as long as it is within a radius of approximately between 200-300m and there is no need to cross a busy street,” Villanueva says. A high percentage of this satellite parking lot services New York Life and another part will now be used for clients in Impera’s new boutique offices.  
There will always be challenges in the market, but Villanueva says it is up to the developer to make the best of the space it has and to innovate in its projects to truly make an impact. “We are no longer a real estate business. We are interested in improving the quality of life of the people living in the neighborhoods surrounding our projects,” he says. “The key to success is making a project that brings a neighborhood to life and boosts the quality of life of its citizens."