Reuse and Recycle: Mexico City's Next Opportunity

Q: What opportunities have you identified for new residential projects in Mexico?

A: The country has a large housing deficit. The problem is finding areas where people have sufficient purchasing power to buy homes. Certain areas outside Mexico City have a smaller economy and people cannot always afford to buy a house. Other markets like Puebla are oversaturated and everyone that has the ability to own a house already has one. Queretaro is likely to be in a similar situation soon. Monterrey, Guadalajara and Mexico City will continue to shine in the residential market because they have a good balance between demand and purchasing power. Developers need to be more cautious with projects outside these cities. Tourism follows a similar pattern. Riviera Maya is picking up while Acapulco is attracting more national than international visitors, due to its security issues.

Q: Given a lack of land, what is the next step for Mexico City’s real estate developers?

A: The next step for developments in Mexico City is to recycle and reuse empty and outdated buildings. It is almost impossible to find empty spaces and if companies are lucky they may be able to find a parking lot on which to build. The city has a lot of potential to grow by remodeling abandoned and underutilized spaces. For instance, Paseo de la Reforma used to be mostly houses and it was necessary to gather several small plots of land and recycle them to develop a large project. Areas like Polanco are transitioning from mostly residential to mixed-use and developers should take advantage of this momentum to remodel the neighborhood.

One issue is knowing the identity of the owner of a particular property. Sometimes, the original owner has passed away without designating an heir. These kinds of problems promote underutilization of properties in prominent areas, even when they are in a state of abandonment. The authorities should have a bigger role in these matters but they often suggest people to not get involved.

Q: Project closures can cause companies to lose time and money. What can developers do to avoid these delays?

A: It is incredibly important to have all documents in order. Chapultepec Uno experienced a temporary decommissioning implemented by authorities but fortunately it only lasted 48 hours because all of the project’s papers were in perfect order. The closure was caused by a neighbor with enough influence to cause trouble. Normally, the authorities give a warning at least one week before closing a project but in this case, it was carried out without the proper justification. The authorities often listen to influential people but projects can protect themselves by making sure they are following all regulations and norms.

Q: How do you use alliances to mitigate risk in your projects?

A: We overcome our weaknesses by allying with partners that have the right expertise. We can offer services in architecture, construction and commercialization and use them as necessary. If the project is only a few hours away by highway, we tend to build the project ourselves. Outside of Mexico City, we use local partners to facilitate access to water and electricity, making the process quicker and smoother. In Puebla, Grupo Proyecta helped us to quickly schedule meetings with CFE to guarantee power for our projects. We also helped Proyecta by offering our expertise on vertical construction in Lomas de Angelopolis for its first vertical projects. We received a percentage of the land value and found additional partners to finance the rest of the project, including financial tools like CKDs.