Leveraging the Expertise of an International PartnerWed, 11/01/2017 - 14:18
Q: What is your analysis of the real estate industry and how do you evaluate optimism in the sector?
A: We continue to be very optimistic and bullish about the potential of real state in Mexico in general. Obviously, certain sectors are more appealing to us than others and we see more growth potential in certain segments. But in general, we think the industry is going through an interesting time. This has been developing since the opening of the capital markets in Mexico seven or eight years ago when the first Fibra was created and the CKDs were launched. At this point, the real estate industry in Mexico underwent a complete transformation, from being a very family-dominated industry to being a much more professional and institutional market.
For the first time, people were able to understand exits when it comes to real estate and they were able to access real estate assets through Fibras on the BMV, not necessarily owning building blocks but owning shares in real estate companies. This resulted in a great deal of liquidity, certainty and transparency in the market. This happened alongside the creation of the CKDs, which allowed Afores to invest in real estate for the first time. At this point, there were hundreds of billions of pesos in pension funds that were not being invested appropriately and were not producing returns. The creation of these instruments created the foundation for a new cycle of real estate development. We have seen in recent years a great deal of capital coming from abroad and looking to capitalize on Mexico’s real estate opportunities. This has translated into a more world-class and up-to-date inventory of real estate, from shopping malls to mixed use and residential developments.
Q: In which sectors do you see most opportunities within real estate in Mexico right now?
A: Different sectors are at a different point in their cycle right now. We continue to be big believers in the retail sector and its growth potential going forward. More and more international brands continue to enter the country every year looking to capitalize on Mexico’s growing middle class, favorable demographics and expanding consumer credit. In terms of office space, there is much more supply than demand, with many vacancies in the prime office sectors, and rents have not achieved significant growth. This sector concerns us. We have been reluctant to invest in office space because we think the speed at which space is being leased is not aligned with the speed of development. We do not see any opportunities for developing office space in Mexico City, Monterrey or Guadalajara because those cities are oversupplied. Residential is a very interesting sector with many subsectors, such as multifamily. This sector is dynamic right now, driven by the desire of Millennials to change their lifestyles. They want to be closer to work and to the city centers and amenities. Residential for rent is an interesting niche that we are looking at right now and residential for sale also appeals to us. The demand for residential in Mexico is still far from being met. There are different socio-economic price points, but the general demand will not be met for the next 10 years so there is a lot of potential. Residential real estate in Mexico is underdeveloped and most of the current stock is obsolete so we continue to see development potential going forward.
Q: What do you require to reach your goals and continue growing as a company?
A: Thor Urbana is a company that is really looking to push the boundaries and break paradigms. Our goal is not to become a Mexican real estate company but to become a global player delivering a world-class project. We have a joint venture with Thor Equities, which is one of the leading real estate investors in the retail sector in the US and Europe. We are trying to leverage its expertise, global exposure and proximity to the most developed markets around the world to gain insights into new trends, new and revolutionary concepts and fresh ideas. There is a lot of information sharing that is helping set us apart from the competition. A new concept called The Lab was launched last year. It is in the development stage at the moment, but through this, we will be tracking local and up and coming entrepreneurs and designers who have great ideas and want to try conceptual business models.