Real Estate in Central America, Mexico and the Caribbean

Claudia Murray, Camilla Ween, Yadira Torres-Romero, Yazmin Ramirez

• Publisher: Routledge
• Year: 2020
• eBook ISBN: 9781000210637
• Edition: 1
• Topic: Architecture
• Subtopic: Urban Planning & Landscaping

This book examines real estate markets and urban development in Central America, Mexico and The Caribbean (CAMEC). It considers both residential and commercial real estate with a focus on industrial and hospitality sectors, infrastructure and logistics.

The CAMEC region is besieged by complexity. Prone to natural disasters, and with the Mexico/US border constituting the largest human migration corridor on Earth, the region is also a vital trading hub for goods, linking commerce between the world's two largest oceans and the Americas. The real estate markets in this area are dynamic, rapidly developing and under researched. This book analyses the particularities of these markets and the context in which investors and developers operate. The authors present case studies and contributions from key players in major cities in the region. The book exposes the regional risks and opportunities connected to urban development including market transparency, urban equity and development regulation. The research presented in this volume gives the reader a comprehensive picture of each country under study, detailing their individual commercial, residential, industrial, leisure and infrastructure sectors.

This is essential reading for international investors, real estate students, researchers, and professionals with an interest in the region.

1

Comparative Overview of Key Real Estate Drivers

1.0 Introduction

Research and thought process for this book was developed between 2018 and 2020. At the time of writing, political changes are happening in key countries that can have a direct influence on Central America, Mexico and the Caribbean (CAMEC). Indeed, there are certain aspects of global politics that influence the economies of the countries under study here, namely, the state of the US economy and the increasing role of China as an important trading partner in Latin America and the Caribbean. While the US economic importance for the region is a long-standing one, China's development bank increasing investments in infrastructure and energy projects is turning the Asian nation into a key economic partner for CAMEC. In recent years and since the US-China trade war initiated by incumbent US President Mr Donald Trump, the Chinese government has increased their presence in large economies like Mexico where in 2019 China became the third most important trading partner after US and Canada. The boost of China's investments in the region can be partly explained by the pledge made by the US government to balance the trade inequalities with Mexico and other CAMEC countries. This has triggered a US retreat and pushed CAMEC to look for alternative partners; finding in China a willing nation to fill the gap. The US-China rivalry might indeed increase the economic resilience of CAMEC as the region will not be relying on one main trading partner. Additionally, the outbreak of a global pandemic in the first quarter of 2020, has seen the global economy tumble even further. The consequences of this are yet to be studied, but urban life and office work have been massively disrupted as retailers are forced to close venues and office workers are ordered to work from home.

1.0.1 How this affects property?

In CAMEC as in the rest of the world, the state of the economy and key market fundamentals have a significant impact on property. However, the peaks and troughs of an economic cycle can be balanced out over the lifetime of a long-term investment such as property, while other short-term investments like equities can carry greater volatility in CAMEC than in more stable developed economies. Real estate investment therefore presents an opportunity for investors in developing countries that have high growth potential while controlling for economic risks that are usually attached to emerging markets. Developing countries can in turn benefit from much needed funds to develop infrastructure projects.

Looking at key social and economic indicators, this chapter provides the basis of this volume and defines the economic and real estate market framework that will be used to explain the particularities of CAMEC countries. The framework presented will enable the reader to understand real estate market analysis as a whole and its application to each country under study. In order to build this analytical framework, internal and external indicators affecting the property market have been used and are explained. Thus, the indicators will include a combination of macro and microeconomic factors as well as fundamental real estate market variables. Using latest data from reliable open source databanks (World Bank, United Nations, IMF, etc.), Section 1.1 starts by presenting the comparative statistics in relation to demographics, population growth and migration for each country, putting them in context with other economies when relevant.

Section 1.2 presents the economic drivers of the region including GDP (gross domestic product), unemployment data and urban growth. This will help to complete the wider picture of the level of socio-economic development and urbanisation trends of countries. After a selection of the most important economies, Section 1.3 brings crucial market data such as interest rates (IR), inflation, wages, consumer spending as well as general supply and demand statistics. Section 1.4 looks at the regulatory frameworks, while Section 1.5 brings the conclusion and evaluates and divides the countries according to the importance of their real estate markets in a global context (mature CAMEC markets) and according to their possibilities (emerging CAMEC markets).

1.1 Key real estate drivers

1.1.1 Demographics

Demographics represent an important piece of data that provides information on the state of the population, its growth and composition. Analysts can infer many aspects of the state of real estate (RE) markets through demographics, for example, they can tell if the demand for smaller houses is higher due to a rise in new families, or measure the impact that migration can have in rents as the space demand increases.

According to the United Nations (UN) classification of countries and population data, there are 26 island states in the Caribbean and eight countries in Central America including Mexico. For the purpose of this study, this UN classification is followed for the collection and analysis of data. As some CAMEC countries have poor data reporting records, the tables presented in this volume have been extracted from other sources when available or left blank if no reliable sources were found.

The 34 sovereign states that comprise CAMEC have a total population of just over 224 million, which represents nearly one-third of the 658 million inhabitants of the entire Latin American and Caribbean (LAC) region (Table 1.1). Mexico alone contributes to more than half of the grand total. The countries can be grouped in five blocks as follows:

1. Populations up to 100 thousand inhabitants (this group includes nine countries: Montserrat, Anguilla, Caribbean Netherlands, British Virgin Islands, Turks and Caicos Islands, Dutch Sint Maarten, Saint Kitts and Nevis, Cayman Islands and Dominica).
2. Po...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Contents
• Expert contributions
• Figures and tables
• Introduction
• 1 Comparative overview of key real estate drivers
• 2 Commercial real estate in CAMEC
• 3 Residential real estate in CAMEC
• 4 Real estate funding in CAMEC
• 5 Delivery and finance of infrastructure in CAMEC
• 6 Barriers to cross-border investment in CAMEC
• 7 Guiding improved urban development: Unsustainable development goals and the new urban agenda, how South America is fearing in the world scene?
• Index