What's Happening With Commercial Real Estate in Tezal?

I think we can all agree on this: the condo market in Tezal and Cabo San Lucas got overbuilt. Anyone paying attention to the area has seen the amount of inventory that's out there now. So the question I keep asking myself is — what's going on with the commercial real estate market in that same area?

Here's what I'm seeing. There's been a clear shift toward building commercial units for retail — think strip malls. Right now there are about four of these projects under construction in Tezal, and that's going to add a meaningful amount of new supply to the market.

We've Seen This Movie Before

If there's one thing we learned from the condo market in Tezal, it's this: when a type of project sells well, more of them get launched — often more than the market can actually absorb. Based on how well these retail units have been selling, I'd guess there are probably another four to ten similar projects ready to be launched in the near future.

That's the exact same pattern that played out with condos, and I think it's going to end up producing the exact same result: an oversupply of commercial retail space in Tezal.

Why This Matters If You're Looking for Commercial Space

If you're personally in the market for a commercial space, here's my take — and it's what I'm doing myself. I'd wait a couple of years before buying. If a commercial unit is selling for $200,000 today, I wouldn't be surprised to see that same space go for $100,000 once this new supply hits the market.

Even more importantly: if you need a commercial space now, rent instead of buying. Within the next year, this market is likely headed toward the same oversaturation we saw with condos, and when that happens, rents are going to come down. That gives tenants a lot more room to negotiate on commercial retail space in Tezal.

Something to Keep an Eye On

I'm confident there's more commercial development coming to Tezal — more than the market is going to need. It's a trend worth watching closely over the next couple of years, whether you're a buyer, a tenant, or just keeping tabs on the Los Cabos market.

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