The Business Year

Joanna Frazier

Managing Director, Greystar

Yuri Zagorin

Director General, ZD+A

Mexican real estate companies, namely Greystar and ZD+A, are finding new ways to respond to demand for residential housing and overcoming obstacles to do it.

What kind of opportunities and challenges are available in Mexico in real estate?

JOANNA FRAZIER The biggest opportunity lies in the sheer scale of Mexico, and multifamily developments are very much a scale-based business. Second, Mexico has the demographic and socioeconomic trends we look for in a new market: large middle and high-income sector, big corporations with big labor forces, and demographic trends such as people getting married and having kids later. Third, there is a huge mismatch between supply and demand in terms of people who actively rent and housing that exists that is designed for renters, not buyers. Around a third of the population currently rents their accommodation, yet of purpose-built rental buildings in all of Mexico City there are five or so operating now that come to mind. In Chicago, I can see that many on one street. We are not creating a new market as demand for rental housing already exists. The issue is that housing is designed for people who purchase, and not for people who rent. We believe there is a huge opportunity to close these gaps between supply and demand.

YURI ZAGORIN We are looking at unprecedented circumstances that the market has never seen before. I had a meeting with the chamber of commerce, and other developers feel that there is no communication with the government agencies, which have become tremendously bureaucratic. Developers in Mexico have a terrible reputation, due to property monopolies and some call us a ‘real estate cartel.’ In addition, we are perceived as a sector with a high level of corruption. We are damaged as well by disloyal practices. We also work with a not-for-profit called Mejor Ciudad that is dedicated to building a better city. It sponsored a report from Mexicanos Contra la Corrupción, Mexicans concerning corruption in real estate. There is a distinction between extortion and corruption.

What kind of advantages does your firm offer in Mexican real estate?

JF Our current developments target young professionals, roommates, executives, companies, and dual-income-no-kids couples (DINKs) or couples with a small child. We target A and B socioeconomic groups given the average rents in our projects, since to qualify you need to meet certain income and credit requirements. However, the fact that we build smaller units means that people who could not afford to rent a three-bedroom apartment in a new, amenitized building, may be able to live with us at a lower price point if they live in our studio apartment. We want to have product that meets people’s needs through their lifecycles so they can grow with Greystar. They can start in our studio when they move out of their parents’ house, graduate to our one bedroom with their first promotion, then into our two bedroom when they become a dual-income-no-kids couple. We also believe there is a huge opportunity in all income segments to create a better rental experience for everyone and while Greystar made the decision to start with that type of product, over time we will likely diversify to various target markets and types of buildings.

YZ I am an architect. I went to school to the US. In the US, I came to understand the importance of real estate development in the shaping of architectural culture. I have always been attracted by both. I have been trying to cover this gap, not because it is what I do but there is a lot to gain from understanding both practices. Our firm is very selective and deals only with a small number of clients. I am not a traditional developer as we do everything in-house. We put the business together, the design and take care of the permits. We do the construction ourselves and do not hire external teams (except for very specialized teams). We do the work ourselves. We also operate some of the buildings. In a way, we are boutique, and we are changing our operating models for longer-term projects.



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