Facing Industrial Real Estate Sector Growth in Mexico in 2024. Challenges in Infrastructure, Connectivity, and Finances

Mexico's industrial real estate market is experiencing significant growth driven by nearshoring and e-commerce. Still, it faces infrastructure, essential services, and financial challenges that require strategic investment and public-private collaboration to ensure sustainable development.

Mexico's industrial sector is experiencing unprecedented growth. Photo: FINSA.

By: SiiLA News

11/13/2023

Mexico's industrial real estate market is experiencing significant growth driven by nearshoring and e-commerce. Over the past four years, the industrial sector has grown by approximately 52% nationwide. However, demand continues to outpace the supply of industrial warehouses in a context where the arrival and expansion of companies within the country and high tenant retention have led to historical highs in market prices and historical lows in availability rates. It's worth noting that nowadays, more than 90% of new inventory is leased before it even hits the market, according to data from SiiLA.

While this situation presents ample investment and development opportunities in Mexico, especially now that the country is the United States' most important trading partner in imports and exports, it also poses significant challenges. These challenges range from developing infrastructure and providing sustainable, high-quality essential services (like water and electricity) to addressing issues related to connectivity and financial hurdles for industrial development.

While there is an urgent need to develop new projects to meet the growing needs of businesses, especially in the northeast of Mexico, it's also true that a strategic focus and careful planning are required to address these challenges effectively. Investment in infrastructure and basic services is essential to ensure an appropriate and sustainable industrial environment. Furthermore, collaboration between the public and private sectors is indispensable to promote responsible industrial development. These and other issues were discussed at the Expo Negocios Inmobiliarios (EXNI) on November 9, 2023, where SiiLA collaborators exchanged views with leaders from major commercial real estate firms such as Colliers, JLL, and Real Estate Investments (REI).

Reflections from EXNI: How to Face Industrial Real Estate Sector's Growth in 2024?

Alejandro Delgado (center) and Carlos Garces (left) from SiiLA attended EXNI 2023. Photo: SiiLA.

During the most recent EXNI event held in Mexico City, prominent professionals from the real estate sector, including Javier Lomelin from Colliers, Juan Carlos Gonzalez Ochoa from Grupo Sinow, Raul Arrollo from REI, Santiago Cobo from Brickwalling, and Sergio Rios from Kampus Desarrollos, explained that to sustain and capitalize on the industrial boom, Mexico must improve its strategic infrastructure and essential services to meet the growing demand for industrial spaces.

The speakers emphasized that the growth of the industrial sector in Mexico depends on robust infrastructure and efficient connectivity. This entails expanding roads, ports, railways, and airports to facilitate the transportation of goods and access to industrial areas, as well as enhancing digital connectivity to optimize supply chain management and operational efficiency for businesses. Additionally, ensuring a reliable supply of electricity and efficient management of kilovolt-amperes (KVA) to meet growing demand and promote sustainability through renewable energy sources is essential. Investment in infrastructure and public-private collaboration are crucial to address these challenges and create a suitable and sustainable industrial environment in Mexico.

Regarding financial challenges in the industrial real estate market, the need to manage development costs and ensure long-term sustainability was highlighted. Access to reliable financing sources and effective risk management strategies is essential. Experts also pointed out that the appreciation of the Mexican peso against the US dollar can benefit foreign investments and the acquisition of imported equipment but requires companies to adjust their strategies to maintain competitiveness in international markets. On the other hand, inflation in consumer markets in the United States and Canada can impact production costs and consumer purchasing power, making it essential for Mexican companies to adapt their business strategies and consider diversifying export markets. Speakers also said collaboration between the financial and real estate sectors is critical to address these challenges and make informed investment decisions.

SiiLA is actively involved in the most important events in the real estate market. For more information on this and other related topics, explore SiiLA REsource or contact us at contacto@siila.com.mx.

Latam

Mexico

National

Industrial

Market Analytics

Development

ABOUT SiiLA

Founded in 2015, SiiLA is the industry leading REsource for comprehensive commercial real estate market insights, news and events across Latin America. The SiiLA suite of innovative products drive greater accuracy, efficiency, and strategic advantages for top players in the commercial real estate industry.