Embarking on a whirlwind journey through time and space, we delve into SiiLA's exploration of the past five decades, tracing the transformative evolution of the industrial real estate sector. In this landscape, industrial warehouses have grown and evolved, standing as silent witnesses to economic progress that defies boundaries. From modest increments in the 1960s to unparalleled expansion from the 1990s onward, culminating in nearly doubling the nation's industrial space over the subsequent two decades, Mexico's industrial inventory unveils a narrative of resilience, economic openness, diversification, and adaptability within an ever-shifting market.

Insights from SiiLA Market Analytics lay bare an apparent reality: over the last half-century, industrial warehouses' gross leasable area (GLA) has experienced sustained growth.

Our journey commences between the 1960s and 1980s, marked by growth from 1% to 8% each decade. Yet, the pivotal moment emerged in the 1990s, ushering in a remarkable upswing that continues unabated. During that decade, industrial GLA surged by an impressive 72%, followed by a doubling of national industrial space within the ensuing two decades, reaching a staggering nearly 70 million square meters by the close of 2020. Over the past three years alone, growth has persisted, with the incorporation of over 13 million square meters, setting the stage for a potential record-breaking influx of new deliveries across the nation by 2023.

The rapid ascendancy of the industrial real estate sector over the past 30 years finds its roots in multiple factors.

In the 1990s, Mexico underwent economic liberalization and solidified the North American Free Trade Agreement (NAFTA) with the United States and Canada. This development spurred increased foreign direct investment and the establishment of maquiladoras and assembly factories to produce export goods using imported inputs. The expansion of the manufacturing industry consequently fueled demand for industrial spaces.

Indeed, between the 1980s and 1990s, the average size of industrial warehouses in Mexico experienced an upward trajectory. Previously hovering between 5,000 and 10,000 square meters, the impetus of foreign investment and trade agreements paved the way for warehouses spanning 15,000 square meters or more. Nowadays, substantial spaces are commonplace, especially in the conurbations of large urban centers and, more recently, in Mexico's northern region.

The increase in industrial warehouse size between the 1980s and 1990s reflects a mounting demand from local and foreign enterprises. This demand is interwoven with heightened production, investments, expansion capabilities, and storage requisites of businesses. This evolution has indelibly influenced real estate market dynamics, impacting prices and the availability of industrial properties, alluring international investors, and yielding positive economic effects on local economies. Nevertheless, this transformation has also unveiled infrastructure, logistics, and urban planning challenges, necessitating service adaptations and sparking discussions about sustainability and land use.

The Past Two Decades

The last two decades have witnessed intriguing shifts, as per SiiLA's observations. The early 2000s ushered in an industrial diversification process that fortified the industrial real estate market. During this period, Mexico broadened its industrial base to encompass electronics, automotive, and aerospace sectors. Growth within these industries fostered a heightened demand for specialized industrial spaces tailored to high-tech product production and assembly.

Moreover, in 2010, Mexico emerged as a pivotal hub for global automotive production. Investments from automotive companies and supply chain providers within the vehicle and parts sector ignited substantial demand for industrial spaces nationwide. Additionally, the adoption of advanced manufacturing technologies and electronic component production contributed to the expansion of industrial GLA.

However, the past decade has witnessed an even more fortified growth trend, driven by company arrivals and expansions, propelled by factors like nearshoring and the e-commerce boom, particularly accelerated post-pandemic, especially from 2020 onward, as companies sought to diversify supply chains and reduce reliance on Asia. As a result, Mexico evolved into a desirable destination for the relocation and expansion of manufacturing and distribution enterprises. This surge has fueled demand for industrial spaces to cater to production and distribution needs closer to consumer markets, notably the United States.

Presently, Mexico's industrial market is undergoing an unprecedented expansion. Nationally, a staggering 90% of new inventory is being occupied upon delivery, suggesting that the absorption of spaces could set a record in 2023, according to SiiLA data. While a gradual equilibrium between absorption and new property deliveries is anticipated starting this year, the present reality highlights a demand that outpaces the supply of industrial warehouses.