Is Los Cabos Overbuilding Commercial Properties the Same Way It Overbuilt Condos?

In the Tezal area of Cabo San Lucas, we witnessed quite a bit of condo development, really starting right before the pandemic and then accelerating at the tail end of it. There was very strong demand for two- and three-bedroom condos with ocean views, and for a while that demand supported the pace of new construction.

At some point, though, it became clear that development had gone overboard and the market ended up with an oversupply of condos. No one is really arguing that point anymore. Very few new condo projects have launched in the past two years — developers are mostly focused on finishing what they already started, and those projects are now competing with a large amount of built-out inventory. The result has been an extreme buyer's market for condos in the area.

I believe I'm starting to see the exact same pattern play out with commercial properties.

Commercial Is Following the Same Path

Commercial properties are a different animal, of course. But it seems like developers are building quite a few commercial properties for sale in Tezal, with three or four more already coming online. If this follows the same trajectory we saw in the condo market, there are likely many more commercial projects in the pipeline that will still launch before developers realize the demand simply isn't there to support them.

What This Means If You're Looking for Commercial Space

If you're in the market for a commercial property for your business, I'd lean toward renting rather than buying right now. Rents are likely headed lower as these new projects come online and developers compete to find tenants.

And if you're looking at buying, keep this in mind: if a commercial property is selling for $200,000 today, I wouldn't be shocked to see that same property selling for $100,000 in a couple of years — depending on how things play out, and whether developers keep building commercial space at the pace they are right now.

What Do You Think?

I'm genuinely curious how others are reading this. Do you think commercial properties in Los Cabos are heading toward the same oversupply we saw with condos?

If you need help navigating the Los Cabos real estate market, reach out to Fletcher Wheaton at fletcher@remexico.com.