Is demand for industrial area outstripping provide in Mexico?

Nearshoring has boosted demand for industrial area in Mexico and is rising, leaving industrial builders struggling to maintain up.

Mexico Metropolis-based actual property fund Meor reported this week that lower than 2% of commercial area is presently vacant nationwide, whereas the determine within the north is near 0%. The scarcity will doubtless develop into extra acute over time, as demand for area is anticipated to double over the approaching years. Meor predicts there will likely be demand for 13 million sq. meters of commercial area over the following 5 years.

The true property fund Meor, which focuses on industrial parks, predicts a requirement of as much as 13 million sq. meters (140 million sq. toes) in industrial area within the subsequent 5 years. (Meor)

Based on U.S. funding financial institution Morgan Stanley, 300 corporations have arrange operations in Mexico in 2023 alone, and US $50 billion of international direct funding may arrive within the nation over the following 5 years.

“Industrial builders are doing our greatest, we’re all constructing at charges not seen earlier than, however there are points that don’t enable us to go sooner,” Meor’s Chief Funding Officer, Jonathan Pomerantz, advised reporters.

“2023 will as soon as once more set a file, each in building and in area occupancy. However I don’t assume we’re making the quantity needed to satisfy demand,” he added.

A file 2 million sq. meters of commercial area was constructed in Mexico in 2022, Pomerantz mentioned, and 2023’s determine may very well be even greater. In early September, Mexico’s Ministry of Finance and Public Credit score (SHCP) mentioned that building of commercial websites in some northern cities had elevated by greater than 150% yearly within the second quarter of 2023, pushed by excessive demand and spiraling rents.

Industrial park in Saltillo
An expanse of commercial parks close to Monterrey, which presently has the best price of leasing and building of commercial area within the nation. (Picture: OCV Salitillo)

“The shortage of those websites has resulted in will increase of their rental costs: through the second quarter of 2023, rents confirmed annual will increase of 24.5% and 16.4% in Monterrey and Ciudad Juárez, respectively,” the SHCP mentioned.

The results of nearshoring are most obvious in Mexico’s northern states attributable to their larger industrial improvement and proximity to the U.S. border. Monterrey, in Nuevo León, has the best leasing and building of commercial area within the nation, based on the brokerage agency Solili.

Nevertheless, whereas the north is racing to maintain up with rising demand, the tempo of building and occupation of commercial area is lagging this 12 months in Mexico’s central area, based on the consultancy Datoz. This meant that transactions of commercial warehouses nationwide fell 17.4% yearly within the first quarter of 2023, the agency mentioned.

The north additionally faces many challenges, significantly concerning power provide. Most industrial hotspots have sufficient power technology, Pomerantz mentioned, however there’s a lack of infrastructure for power conversion and transmission.

A number of current surveys of commercial park house owners have discovered that total warehouse area in such parks is nearing 100% occupancy, significantly within the north. (ProLogis/X)

Regardless of these difficulties, shortages and rising rents, analysts agreed that the reconfiguration of world provide chains ensuing from the COVID-19 pandemic, U.S.-China commerce tensions and the Russia-Ukraine warfare will proceed driving companies to Mexico.

“Given the significance of america market worldwide in consumption, settling in Mexico will likely be needed for corporations that wish to preserve a business relationship with that nation, at the very least within the brief time period, regardless of having greater prices than different international locations,” Fernando Pliego, Audit Accomplice at Salles Sainz, advised newspaper El Economista.

With stories from El Economista, Forbes and Expansión

Leave a Reply

Your email address will not be published. Required fields are marked *