Northern Mexico: magnet for foreign investment in industrial warehouses

Activity in northern Mexico's industrial real estate sector gained momentum in the first months of 2024, especially due to demand from foreign automotive, medical and appliance manufacturing companies.

The industrial real estate market in northern Mexico has shown significant growth during the first half of 2024, especially in Saltillo, Coahuila and Ciudad Juarez.

In Saltillo, more than 300,000 square meters of industrial buildings were sold, 27% more than the same period of the previous year.

This momentum has been driven by foreign companies, especially in the automotive, medical and appliance sectors, seeking to consolidate their operations in the region. The boom has generated a deficit of available space, with only 0.03% of the new 292,000 square meters still available at the close of the second quarter.

Ciudad Juarez has achieved one of the highest net absorption rates in its history, with 226,700 square meters of new industrial space, reflecting its attractiveness to international companies.

The Mexican market has significant strengths that have enabled this growth. The country's strategic location, close to the United States and within the T-MEC framework, allows foreign companies to benefit from the proximity to one of the largest consumer markets in the world.

In addition, Mexico has a competitive and skilled labor force, which facilitates the installation of manufacturing operations, as evidenced by the interest of automotive and medical companies. The strong industrial infrastructure in the north of the country has been a key factor in meeting growing demand, although the limited availability of space in some cities poses challenges for the future.

Within this landscape, significant opportunities also arise. The global trend of nearshoringThe new initiative, which encourages the relocation of production operations closer to consumer markets, is generating a wave of new foreign investment in Mexico.

Companies from the United States, Canada and China, which account for a large share of foreign direct investment, have found Mexico to be a key partner in reorganizing their supply chains.

The country has positioned itself as a viable option for risk diversification, especially in the face of the trade tensions and logistical challenges faced by other regions of the world. This context also opens up opportunities for the development of new industrial infrastructure, which will allow us to continue absorbing the growing demand.

However, not everything is favorable. The rapid growth of the industrial real estate market also reveals weaknesses. The supply of industrial buildings is not growing at the same pace as demand, which is generating a shortage of available space, especially in areas such as Saltillo and Ciudad Juarez. This may lead to an increase in lease prices, which could discourage some companies from locating in the region if immediate solutions are not found. In addition, competition to attract foreign investment is fierce, and other regions of the world, such as Southeast Asia, are also positioning themselves as viable alternatives for nearshoring.

The market also faces external threats that could impact its long-term growth. Geopolitical tensions and global economic uncertainty could affect the flow of investment into Mexico, especially if international trade agreements such as the T-MEC are re-negotiated or face difficulties.

Dependence on foreign demand, particularly from the United States, makes the Mexican industrial market vulnerable to any economic slowdown in its main trading partner. Finally, the challenge of sustainability in industrial operations and the need to implement greener and more efficient practices could also increase costs and complicate the rapid expansion of infrastructure.

Growth in the industrial real estate market in northern Mexico is undeniable, but it is accompanied by a number of factors that will shape its future. The strengths and opportunities are clear, fueled by the country's strategic location and the nearshoringHowever, weaknesses and threats related to limited infrastructure and global conditions require attention to ensure that the sector continues to be a key driver of the Mexican economy.

Collaboration: Editorial Auge.