Historic growth in Mexico shows that during the last 10 years a yearly an average development of 1,000,000 m2 and 38 new shopping centers nationwide have been registered (Chart 1 Development of shopping centers 2000-2015). However, from the real estate crisis of 2011 an important reduction in the development of new spaces has been observed, and it has not shown signs of recovery.
In spite of that, in 2014 we started to see many projects that had only been in the planning stage, materialize, with the opening of 23 new shopping centers2, many of which were only a project for some years. In short, these new developments make up 627,000 m2 of GLA3; in other words, an increase of 3.9% was generated, with respect to the installed surface in 2013. This record was lower than 5.7% from 2012-2013, although an important upturn of the sector is expected this year. Therefore, by the end of 2014, the entire inventory in the 82 main cities in Mexico reached 669 shopping centers with 16.9 million square meters of GLA, to what we need to add some 4,900 small convenience shopping centers or Strip Centers that are estimated to exist in the whole country. (Chart 2 Development of shopping centers and population).
The most important openings according to their sizes in 2014 were: “Parque Central Toreo”, from Grupo Danhos, in Naucalpan, Estado de México, with a leasable surface of nearly 78,000 m2 of GLA, and two new shopping centers from Liverpool, “Galerías Serdán” in Puebla, and “Galerías Toluca”, with two estimated surfaces of 56,000 and 46,000 m2 of GLA, respectively. The developers with greatest presence were Acosta Verde, with three new “Plaza Sendero”, that amount approximately 110,000 m2 of GLA, and Liverpool with two new “Galerías”, that total around 102,000 m2 of GLA (Chart 3 Shopping Centers –Openings 2014).
The development of new shopping centers is happening in different regions around the country, although the Central area remains as the most active one with 43% of the openings and 51% of the new commercial surface, and new developments in Mexico City, Puebla, Cuernavaca, Toluca, Santiago Tianguistenco, and Tlaxcala.
The South Region opened 6 new shopping centers, while the Country’s North Region reactivated the sector with the opening of 4 new plazas (3 in Monterrey), after 2013, when no openings were observed. In turn, the Bajío and Western areas were rather inactive in 2014, with barely 3 new openings, after a very strong 2013, when 10 new malls were opened.
The city with the highest growth regarding commercial surface was Ciudad del Carmen increasing from 54,000 m2 in 2013, to 87,000 m2 of GLA in 2014, which equals 61%. Other cities with high growth rates were: Oaxaca (37%), Cuernavaca (32%), Coatzacoalcos (28%), Puebla (24%), Mazatlán (23%) and Tlaxcala (21%).
Excepting Puebla, the growth of each one of the abovementioned cities refers to only one shopping center, and thus, it will be difficult to see them again as the highest commercial growing cities in the years to follow.
In average, small cities (populations of approximately 100,000 and 400,000 inhabitants) registered an increase of 7.8% of GLA in shopping centers. Medium and large cities showed an increase of 3.8% and 3.5, respectively.
On chart 5 Comparative index of commercial supply, both in operation and under construction, we observe a comparative analysis from 2014 between the populations of the country’s main cities, average family income, and gross leasable area GLA), from which we can obtain a development index that compares with the average of each city group (per size), hence, points are obtained or lost depending on the GLA per inhabitant (more GLA corresponds to less points), and the total family income that exists in the city per GLA (more income corresponds to more points). This index creates an outlook where we can see which cities, compared to their equivalent, could have greater real estate potential for the development of new shopping centers.
It is important to point out that the index of Development is not definite for determining the development capacity of a City or any particular area in them, nor does it consider the transient population generated in touristic and border areas, and that it only includes those operating and under construction shopping centers but not the ones in the project stage.
Other important indicators that allow us to know the country’s situation in the shopping center sector are occupancy levels and average lease prices 4 of spaces (Charts 6 and 7 Lease and Occupation by category and type, Occupation and Lease).
Through continuous sampling practices performed by MAC over the last 8 years, we have found that great cities have the highest lease prices, exceeding 400 pesos per square meter, whereas occupancy reaches 92%. In medium size cities, occupancy remains in 91%, higher than that of small cities, however the latter have higher leasing prices ($339 VS $308 pesos/m2).
In this same analysis performed by categories we can see that Super Regional malls have higher lease prices, with 860 pesos per average square meter, with an occupancy level of 95%.
Neighborhood shopping centers register the lowest occupancy and lease levels. By their types, Fahion Malls have the highest lease prices of all, close to 640 pesos per square meter. On the other hand, Outlets have lower rents, an average of 220 pesos per square meter, due to the fact that premises in these malls are bigger and normally pay an additional percentage over sales.
Entertainment Centers register the lowest occupancy levels, although rents are higher than average, close to 420 pesos per square meter.
The Northern region of the country has the lowest occupancy and rent levels, whilst the Central area has higher rent prices, mainly due to the fact that Mexico City has an average rent price of 530 pesos per square meter, resulting in an average increase.
Following the last years’ trend, 2013 and 2014, we were able to witness the arrival of new international firms and the creation of new franchises with an interesting expansion potential (Chart 8 New Retail brands in Mexico).
These amount almost 40 new brands, the same number registered between 2011 and 2012. For 2015, it is known that 9 international brands will have the intention of arriving the Mexican market, and among them, are: Abercrombie & Fitch, Hollister, Top Shop, Old Navy and Le Coq Sportif.
What has been previously mentioned means that we can expect that the arrival of new brands could continue both this year and the following, and therefore this diversity will generate new market options, which, as seen in the previous years, will boost the development of new commercial complexes to give room to this new supply.
The outlook for 2015 is a growing and recovering commercial real estate sector, with better expectations regarding the amount of openings and of construction of new projects.
The 38 new shopping centers under construction and that could be operating by the end of the year would add nearly one million square meters of GLA to the existing supply, which could represent 6.3% compared to 2014, and hence, growth records could be in the same level as the years prior to the economic and real estate crisis.
1 For this article’s purposes, we have regarded as Shopping Centers those ones anchored by a self-service, department store and/or movie theater complex, and that have 30 commercial premises or more; or, because of their size and tenant mix they have an area of Regional influence as would be the case of Power Centers, Outlet Centers, and Entertainment Centers.
2 For this article’s purposes, we have regarded as Shopping Centers those ones anchored by a self-service, department store and/or movie theater complex, and that have 30 commercial premises or more; or, because of their size and tenant mix they have an area of Regional influence as would be the case of Power Centers, Outlet Centers, and Entertainment Centers.
3 Gross Leasable Area.
4 Asking Price per model commercial premise.