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Shopping Centers Today -> September 2002
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ICSC FORUM TOUTS OPPORTUNITY SOUTH OF BORDER
By Debra Hazel
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| A stable economy and abundant consumers with more to spend make Mexico attractive to retail developers. |
Despite a risk of overbuilding in Mexico, poverty in Central America and security problems in both, the two regions offer significant opportunity to shopping center developers, said speakers at ICSC’s first Mexico and Central America Business Forum, held in July in Mexico City.
In many respects, the evolution of shopping center development in Mexico has followed that of the United States, Canada and Europe, where a strictly fashion orientation at regional malls has expanded to include more entertainment. Some of the challenges are the same too, including the risk of overbuilding. In Mexico’s case, for instance, rampant cinema expansion followed the government’s decision in 1993 to stop setting movie ticket prices, an echo of what happened in the United States, one speaker observed.
“You have to make sure you’re not saturating the market,” said Enrique Ramírez, director of general administration and strategic planning at theater owner Organización Ramírez, Morelia, Mexico. “If the boat sinks, the effect is not just on theaters, but on the other stores.”
There could be a problem with too many shopping centers as well, particularly in Mexico City, despite its more than 25 million inhabitants, observers said.
“We have saturated the marketing in the most-important cities,” said José Luis Quiroz Robles, director of shopping center development for Mexico City-based developer Gicsa.
Secondary cities may be the key to further growth, several speakers noted, and airports may also provide new opportunities, Quiroz added.
The market is attracting interest from U.S. developers and retailers. Kimco Realty Corp. announced in July it plans to buy two, and possibly more, centers there. Chelsea Property Group plans an upscale factory outlet center in Mexico City. Wal-Mart, Home Depot and other chains are expanding there also.
Unlike its neighbors to the north, Mexico does not permit pension funds to invest in shopping centers, nor do REITs exist. But both situations are expected to change. “Pension funds will have to invest in real estate sooner or later,” said Roberto Ordorica, Latin America vice president at Prudential Real Estate Investors-Latin America, Parsippany, N.J.
In addition, General Electric Capital Corp., which has invested in Mexico since 1994, seeks to double its reach in the country over the next few years, said Jaime Lara, director of GE Capital Real Estate, Mexico City. Mexican banks are also looking at retail real estate investments.
But investing in existing centers isn’t easy, because of multiple ownership deals.
“We see centers that are doing fine and are very attractive,” Lara said. “But when you negotiate, you find that you have five or 10 groups involved, and it’s hard to get them all to agree.”
Another concern is security — or the lack thereof — particularly in areas where street crime is a part of daily life.
In Central America the industry is less advanced, but nevertheless offers opportunities, with 40 million inhabitants and major cities with attractive household incomes, said Carlos Ramírez Ramila, operations director of development firm Spectrum, Guatemala City.
PriceMart and theater chain Cinepolis have already taken the risk and are doing well, Ramírez noted, urging other companies to follow their example.
 | Current Issue November 2008 |