As provide chains more and more shift away from China and nearer to the U.S., Mexico has laid down the welcome mat for U.S. and overseas corporations seeking to relocate their operations close to to the U.S. border however with decrease prices. The nearshoring technique has succeeded to the purpose the place web absorption of commercial house in Mexico’s six most important markets has doubled in three years, in line with a current report from Prologis. A lot of the house below development is already pre-leased, and rents have shot up.
The pattern has created a parallel demand for warehouse house in U.S. cities alongside the border, with manufacturing concentrating in Mexico and distribution within the U.S., GlobeSt.com has reported.
Prologis recognized many indicators that nearshoring is the underlying driver of demand for logistics house in Mexico. Annual absorption of leased logistics house for manufacturing to produce the U.S. market rocketed from 3 million SF in 2019 to 16 million SF in 2022, rising from 8% to 26% of gross absorption within the nation. Tier 2 nearshoring absorption by home suppliers and third-party logistics suppliers additionally shot up from 15 million SF in 2019 to 29 million SF in 2022.
One other sign is that Mexico’s imports of equipment rose 52% from the pre-pandemic common of $88 billion a yr to $152 billion in 2022.
An inflow of worldwide automotive corporations which have established meeting crops in Mexico’s Bajío area is one other robust indicator of nearshoring. The area consists of the cities of Guadalajara, Léon, Santiago de Querétaro, and Aguascalientes. Demand for logistics house within the space has elevated sharply.
In March, Tesla introduced plans to construct a Gigafactory in Monterrey within the state of Nuevo Léon. Prologis predicts the $5-$8 billion funding might end in 25 million SF or extra of recent logistics actual property demand.
“We estimate that each $1 billion invested in Mexican auto factories can generate 5-10 million SF of native logistics demand throughout the two years that observe,” Prologis said.
The push into Mexico has made industrial house scarce – simply 1.1% was out there in Q1 2023 within the nation’s six most important markets. Area below development is already 60% pre-leased. Consequently, these markets have skilled the very best lease progress in 10 years – 16% in 2022 – a pattern anticipated to proceed by 2023.
Proximity to the U.S. is, after all, a serious benefit for Mexico. As well as, it’s a occasion to the important U.S.-Mexico-Canada Settlement in addition to to free commerce agreements with the European Union and Japan. U.S. restrictions on commerce with China affecting sure superior applied sciences encourage nearshoring. An ample provide of lower-cost, expert employees is one other attraction.
One drawback is the constraints of Mexico’s federal electrical grid that generally forces builders to construct various infrastructure. Nonetheless, Prologis expects the issue to be overcome in time.
Prologis views all this exercise as simply the primary wave of funding from the surface. “We count on this motion to play out over many years as native economies construct a crucial mass of infrastructure, experience and suppliers,” the report said. “This won’t be restricted to the already robust auto sector; we additionally count on electronics to take a bigger function in Mexican exports.”
