An analysis by Barclays Research noted that the Mexican real estate sector could be a relatively safe haven for investors.
Analysts took a cautious approach to the office and retail real estate markets, because they believe it is too early to reach a reliable conclusion amid the health phenomenon we are experiencing.
Despite Mexico facing the worst economic recession in decades, the real estate sector could be a relatively safe haven for investors, an analysis by Barclays Research stated.
Analysts claim to have a positive position on the industry, based on four reasons: its high dividend yields for 2021 with an industry average of 10%; attractive valuation; low levels of leverage of its participants in the stock market and; encouraging long-term industry trends. However, they recognize that the strong contraction of the country’s Gross Domestic Product (GDP) will have an impact on unemployment, consumption and, inevitably, on the real estate sector.
In particular, they are positive in the industrial real estate sector, because they consider that Mexico’s industrial activity must continue its course, which is based on two fundamental variables:
- The entry into force of the USMCA on July 1, where they foresee that many companies will move their supply chains to Mexico.
- Electronic commerce should boost demand for the logistics space.
Finally, analysts at Barclays took a cautious approach to the office and retail real estate markets, believing that it is too early to reach a reliable conclusion amid the health phenomenon we are experiencing.
Opinion of each station
Fibra Uno: While the COVID-19 pandemic could affect retail and office operations in the short term, FUNO’s strong cash position, favorable debt maturity schedule and attractive valuations support Barclays’ positive view of the company.
Danhos: Analysts understand that the COVID-19 pandemic could bring many changes in the retail and office segment, but they believe it is too early to describe them; its positive vision is based on the quality of the Danhos portfolio with premium locations, attractive valuations and a less competitive environment.
Fibra Prologis: While they like the fiber business model, its tenant base, and its focus on growing sectors such as e-commerce, which should expand further from the COVID-19 pandemic, analysts were discouraged by relative valuations and not the null increase in your target price.
Vesta: From a financial point of view, they don’t expect a strong impact from COVID-19. However, as the company is a pure industrial real estate developer and the relative valuations are not very attractive, they prefer to remain on the sidelines.
Fiber Macquarie: While they expect fiber trades to remain resilient, its significantly lower rise compared to its peers and not-so-attractive relative valuations make them cautious about their stocks.
Terrafina: After incorporating a milder impact from the COVID-19 pandemic and a lower cost of capital inputs, they increased Terra’s target price. However, until they clearly know Terra’s 1Q20 earnings in the coming days, they will have a better opinion on these stocks.