Supporting International Companies in Mexican Real Estate JourneyBy Jan Hogewoning | Mon, 12/07/2020 - 12:46
Q: How has the pandemic impacted your activities?
A: The biggest impact has been on hotel projects in tourist destinations, although we believe this will be short-lived. Government restrictions related to COVID-19 also have had an impact. The restrictions have varied, and will continue to vary, but we do not believe that there will be another suspension of construction work because the country has been able to improve its contingency management.
From the point of view of our business, we bolstered our technology in several areas. That has allowed us to make remote decisions more efficiently and increase our connectivity with our teams on the ground. We have a very potent CRM platform through Salesforce and we also have projects that use Oracle software.
Q: What types of real estate are you focused on?
A: We are focused on two lines in particular. One is industrial, which is performing well. This segment includes warehouses, factories, logistical centers and distribution centers. USMCA has made this area increasingly important. The trade tensions between the US and China have also bolstered the segment as more companies look to Mexico as an alternative. Mexico has many ports and its logistical infrastructure has been expanding every year. In terms of projects, we are looking at the northern industrial corridor of Mexico City, the largest industrial corridor in the country. We have also developed industrial spaces in the Toluca area, the Bajio, Monterrey, Guadalajara and in the southeast of the country.
Our second focus is on mixed-use properties. These developments offer commercial spaces at street level, with residences, hotels or corporate offices occupying the floors above. We still have some new projects that are hotel-only properties, particularly all-inclusive hotels. Many of Mexico’s tourist destinations, particularly Tulum and the Mayan Riviera, remain hot spots for real estate investment.
Q: Who are some of PARKS’ most recognizable clients?
A: PARKS works with large international and national clients. These include Citibanamex, Santander, BBVA, Walmart, General Electric, Univesidad Icel, Alsea, Coppel, Liverpool and Palacio de Hierro. Right now, we are focused on tech, e-commerce and distribution companies, but we continue to work with our large clients.
Q: What are the common factors in your approach to construction?
A: The soil in Mexico varies, requiring different types of structures. In any case, we ensure our projects adhere to ecological and sustainability standards. We seek LEED certifications and similar standards for our developments. Our projects also employ a local workforce as much as possible. We work with many national companies.
Q: Why would a potential foreign client turn to you for its real estate development?
A: We have broad experience and a strong track record for delivering a diverse range of projects. We can pretty much build anything the client needs, employing a build-to-suit approach. If the client wants a particular interior design, or wants to invest in an unusual addition, we can do it. We offer three services in property development. First, we develop from zero. Second, we renovate to provide better use of the real estate. Lastly, we can acquire a project and optimize the real estate with a better client, a better operation and integration of technology.
PARKS is a developer dedicated to five activities in real estate: construction, project management, commercialization, property management and marketing. This helps us guide clients through the entire process of their investment. When they acquire a property, we accompany them on their journey with the new project. For example, after having built an office, they may want a storage site, a distribution center, shops or residences for employees. We support them in this expansion.
Q: What are the primary concerns of foreign companies?
A: The primary concern is the judicial and political uncertainty in Mexico. There has been improvement lately but more is needed. The government needs to provide more confidence to foreign companies. Another worry for companies seeking to increase their real estate presence in Mexico is the road infrastructure and connectivity between states. Mexico has unique connectivity to Latin America, the US, Europe and other global regions but the connectivity within the country itself is lacking. We need to improve this. Government projects such as trains and new highways certainly help.
Q: What more should Mexico do to attract international real estate investment?
A: International companies have multiple choices when it comes to the location of their new technology center or logistics hub. We need to offer greater fiscal and economic incentives at both the federal and state levels to ensure these companies choose Mexico. For example, considering the number of hectares in federal ownership, the government could deliver incentives through land concessions or by allowing payments over time. Also, companies that generate local employment should receive fiscal incentives. A previous public-private investment initiative allowed public projects to be funded by private money in exchange for a discount on fiscal stimulus.
The states that have done these things very well are Guanajuato, Queretaro, Aguascalientes and others in the Bajio region. International companies have established their global businesses there. This has then attracted more businesses that supply to these companies.
Q: What adaptations need to happen in the corporate office segment as a result of the pandemic?
A: In Mexico, we had a small oversupply of corporate offices for a few years. This was due to the high number of new companies entering the country, which led to a good absorption rate. Now, with the crisis, landlords are looking to give offices a new purpose, such as hospitals, medical clinics, rental homes, retirement and senior residences or university spaces. We need to be creative in providing new solutions.
Q: What is your approach to real estate investment?
A: Our approach to investment at Parks is primarily focused on location. Location is the basis for deciding an investment. We also try to maintain stable finances so that we can continue investing even in times like these. We have a very large network of clients, at all levels, and about 90 percent of our clients are triple A. This gives us a certain agility in projects. It also provides certainty related to ROI for investors.
We are able to get good locations because we are a large company. Many properties are sold off-market and often they approach us. Parks also has a long-term vision. We will buy a land parcel and then wait for the right time to start development, even if that is a few years down the road.
PARKS is a real estate development firm that offers services in construction, project management, commercialization, marketing and site management.