Two Red Flags in Ciudad Juárez’s Industrial Market: Rising Vacancy and Slowing Demand

Just a couple of years ago, securing industrial space in Ciudad Juárez was a massive challenge. Availability was practically nonexistent, demand seemed endless, and nearshoring appeared to be an unstoppable growth catalyst. But the market is a volatile creature, and what once seemed like fertile ground for developers has turned into a battlefield where tenants now hold the upper hand.

The transformation has been drastic. From a 0% vacancy rate in early 2023, Juárez closed 2024 at 6.6%. A number that, in other markets, might not raise alarms, but in a historically tight city, marks a turning point. What happened? A cocktail of speculative supply, industrial reconfiguration, and structural issues.

The first ingredient in this equation is the boom in speculative inventory. Fueled by nearshoring euphoria, developers stepped on the gas without measuring the true extent of demand and began building without ensuring enough tenants were ready to absorb the new inventory. Thus, in 2024, 57% of the warehouses delivered in Ciudad Juárez were speculative, the highest proportion ever recorded in the region. But it's not just about the percentage—it's the volume: 316,000 square meters were added without a guaranteed occupant, a figure exceeding the total developed in the previous three years combined. This imbalance increased supply and coincided with weakening demand, causing a double impact on the market.

Added to this is the unprecedented construction pace over the past two years. In 2023, more than 950,000 square meters were added, surpassing the total inventory developed in the previous five years. In 2024, the trend continued, with more space delivered than in 2021 and 2022 combined. In those years, net absorption exceeded new developments, but in 2023 and 2024, the equation flipped. Developers bet on demand that ultimately slowed down, and as the market shifted, tenants began leaving.

As a result, Ciudad Juárez, which previously had no vacancies, now has 30 vacant warehouses totaling 560,000 square meters. At last year's absorption rate, it will take at least two years to fill them without considering what is still under construction. With more empty space and fewer interested tenants, the market contracted, competition among landlords intensified, and the balance of power shifted, giving tenants greater negotiating leverage.

The second ingredient is the reconfiguration of demand. Net absorption in 2024 was three times lower than in 2023, and tenant departures set the tone for the year. In the last 12 months alone, 22 companies left Ciudad Juárez, most from the automotive, capital goods, electronics, and packaging sectors. Among them, 13 shut down operations to move to other markets, six simply left the region, two opened new facilities in other regions, and one relocated within the same market. Among the companies that moved operations a quarter before or after leaving Juárez are BorgWarner and Resideo Technologies, which together vacated more than 47,000 square meters to relocate to Saltillo, San Luis Potosí, and Tijuana.

This exodus responds, in part, to a shift in some companies' operational logic. Many who left did not rely on exports but on the local market, making a move to Bajío more efficient. Other players faced energy issues: Ciudad Juárez, with its rapid growth, encountered limitations in supplying certain manufacturers, pushing some companies to relocate.

The shift in market dynamics has altered the balance of power and introduced uncertainty among landlords. With slower absorption and increasing supply, incentivizing tenants has become a key factor in negotiations.

¿Are discounts coming? There is still no strong evidence that rents will decrease, but the rate of increase has already slowed. For every square meter occupied in 2024, half a square meter was vacated. And if the trend continues, the balance of power in negotiations will continue tending in the tenants' favor.

The case of Ciudad Juárez is a brutal reminder of how quickly the balance can shift in the industrial sector. In 2021 and 2022, net absorption outpaced new inventory. In 2023 and 2024, the cycle reversed: developers built in anticipation of demand that ultimately did not materialize as expected. Today, Juárez remains a key market, but with a new face: no longer a landlord-dominated board, but a space where tenants have taken control, at least for now.

For more information on Mexico's industrial real estate market, visit SiiLA REsource or contact us at contacto@siila.com.mx.