Funds not reaching the real estate market

By Mariano Capellino

The collapse in the commercial real estate market due to the crisis originated by COVID-19 has not reached rock bottom yet and it will take at least two more years to start seeing “for sale” signs and auctions of properties.

“We are not seeing auctions yet and there is no evidence of recovery from the crisis either. We believe that the fall in the market is still to come. We don´t know how long it will take, probably two or three years more until hitting rock bottom and starting the recovery process that will offer big opportunities, the possibility of accessing lower prices and initiating a true recovery of the cycle”.

Luis Méndez Trillo, President of Coldwell Banker Commercial México informs the commencement of Inmsa´s operations stating that, even though there is no crystal ball to know the exact moment for the recovery, these are cyclical behaviors and they reveal some data.

“We have seen that COVID has generated a decrease in sales, I´m talking about commercial properties, rents are lowering, rents in mall spaces are lowering, this type of properties are going down, except for industrial properties which are solid and strong, but still no discounts for acquisitions are perceived”, he explains.

INMSA is offering their clients some investment options involving commercial properties, starting with one million dollars, with the purpose of obtaining better returns in a shorter period of time.

In this regard, Mariano Capellino, CEO of INMSA agrees that it will take some time for the countries of the region to be affected in their period of growth.

“Considering that we enter a market when we have evidence of a strong recovery, we are not seeing that situation in Latin America yet, there is still space for correction which may subsequently generate a rebound process. It is difficult to make predictions as every market has numerous variables, but we think that in the next two or three years we´ll see a possible strong recovery starting in 2024-2025”, says Capellino.

INMSA takes into account the analysis of 104 variables when advising their clients on investments in the commercial real estate sector.

“We first start with institutional variables, legal certainty of a country, property right, how to vacate a property. After that, we analyze macroeconomic aspects, inflation, country risk level, unemployment rates, country growth and a variable sector related to macroeconomics” says Mariano Capellino, CEO of INMSA Real Estate Investments, who initiated operations in Mexico in alliance with Coldwell Banker Commercial Mexico.

The intention of the project is that high-net-worth families seeking to increment their equity safely, can do so by investing in commercial properties in different zones of the country.

This is a different crisis because even though the economy came to a halt there is still capital and liquidity. The sectors which have been affected reached such a point that they can be acquired at a good price and the economic rebound is about to happen.

“Spain´s historic competitors in terms of tourism have always been the USA, Mexico, Italy and France and, if we go back 30 years ago, the only country that has reached four times its number of tourists was Spain. The rest of the competitors only reached twice the volume of tourists. Therefore, there are big chances to access, for instance, hotel opportunities as today hotels are at very low prices. Also, retail stores visited by tourists is a good market to enter. There have been no visitors for one year and a half, therefore their prices are really low, and the same applies to offices, there are big opportunities. This is the right time to enter Spain”, said Mariano Capellino.

Because of the economic stop generated by COVID-19, many companies could not get ahead and banks have kept their properties, which can be acquired in auctions at prices quite below the market value.

“There is an important migration of money that is not being profitable and which is moving to the real estate business seeking to obtain higher returns, thus generating a very short opportunity window for market recovery. The same process currently experienced by the USA is a boom and it is arriving in Europe, and we anticipate that in the next 18 months, the same situation lived in the USA will occur”, affirms Capellino.

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Source:  Reporte Indigo