Commercial Rent Increases in Mexico: Negotiation and Contracts

Unlike residential leasing—which is strictly regulated at the state level—commercial leasing in Mexico is primarily governed by the local Civil Code (Código Civil) of the state where the property is situated. According to the Supreme Court (SCJN Jurisprudencia 1a./J. 170/2023), real estate leasing is classified as a civil matter under state jurisdiction, operating within the world of the fully free market, maximizing pure supply and demand.

1. The Strong Principle of "Freedom of Contract"

For commercial properties (e.g., warehouses, retail plaza locales, offices, and pre-built logistics navels), there is no maximum government ceiling for the moment it is decided to increase or agree upon an initial rent. Neither is there legal mandatoriness freezing rents if the contract expires in its temporality (it is usually renewable and subject to negotiated yearly review). If the businessman and the tower owner agree that a 20% annualized increase will form the contract due to the capital gain of the corporate area, Mexican justice assumes and obligates this full compliance under the principle of freedom of contract (Pacta Sunt Servanda) as established in Art. 1796 and 1832 of the local Civil Codes (e.g., Código Civil para el Distrito Federal) from the corporations under their responsibility upon signing.

2. Typical B2B Market Agreements

Because drafting and renegotiating millionaire contracts year after year would cause severe attrition to Boards of Directors or Plaza Administrators, the market utilizes formal mechanisms of progressive scalability in multi-year contracts (usually agreed for 5 to 10 years):

A. The Adjustment Clause (Increases according to Official INPC)

The universal case for Mexico regarding offices and light industry is annexing a stipulated forced update (upon fulfilling each obligational anniversary year) of the rent and policy amounts, always equaling and minimally obligating to the INPC (National Consumer Price Index accumulated over the previous twelve months). Pursuant to Article 59, Fraction III of the Law of the National System of Statistical and Geographical Information, the INPC is exclusively calculated and published by INEGI. If official inflation in Mexico during 2025 was 5.12%, the pro-forma invoices for the start of 2026 are issued with their new amount without having an additional prerequisite since this is the "national inflationary base adjustment".

B. INPC + Basis Points (Additional Plusvalía)

For AAA locales or High-Street retail, or faced with doubtful or volatile inflation in certain past sexenniums, secure factors are agreed upon that stagnate risk: "INPC plus (+) 3 Percentage Points" or even a simple secure clause that states: "Every rent will increase at term of the year by 8% or the INPC, strictly and inexcusably choosing whichever resulted higher at the accounting close."

3. Variable Rent (The Retail Monthly Earnings Component)

A requirement of the most predominant Shopping Centers across Mexico: leasing to companies on sub-anchor floors includes the "Fixed Minimum Guaranteed Rent (RMG - Renta Mínima Garantizada)" plus a settlement from an extremely Anglo-Saxon scheme, the "Percentage of Net Sales" (Porcentaje de Ventas Netas). Specifically, the landlord has audits over this or demands the fiscal cash-out. It is usually fixed between 5% and up to 10% of the transactional earning, billed in the period upon expiration of the parties and this operates mostly overlapping the month's rent replacing legally one limit over another (if sales resulted massive in that geographical location of concurrence).

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