The average industrial building in Tijuana measures 10,500 square meters of gross leasable area (GLA), which is 9% to 61% smaller than in regions like Saltillo, Monterrey, Ciudad Juarez, Reynosa, and Mexicali, where industrial properties average between 11,500 and 17,000 square meters.

Several factors might contribute to the smaller size of industrial buildings in Tijuana, including the availability and arrangement of land, construction costs and technologies, market demand, local regulations, and proximity to the United States.

One of the most distinctive and challenging aspects of Tijuana is its topography. According to INEGI data, Tijuana's location at the foothills of the Sierra de Baja California results in mountainous terrain characterized by canyons, hills, and ravines, complicating urban development. Unlike other regions like Monterrey and Saltillo, which also have mountainous terrains but more flat space for urban expansion, Tijuana faces additional challenges due to its rugged and fragmented landscape, complicating infrastructure planning and construction.

The high demand for space has exacerbated the limited availability of suitable land for industrial use. According to SiiLA, Tijuana has one of the lowest vacancy rates among northern markets. Although availability began to rise in 2023 thanks to significant inventory additions, its current level, below 2%, remains one of the most constrained nationwide. As occupancy adjusts to supply in the medium term, the vacancy rate may return to levels observed between 2021 and 2022, below 1%.

Notably, land availability limitations and the scarcity of available spaces have shaped the supply of industrial buildings in Tijuana. Historically, developers have adapted their projects by offering smaller industrial buildings to maximize the use of available land and meet market demand. However, this trend has been reversing over the past five years, with the delivery of increasingly larger buildings. This shift reflects developers' efforts to address growing demand and market evolution, allowing for more efficient and expansive use of available industrial land. An example is the Prisma III building in the Pacifico Industrial Park, delivered in 2022, with over 56,500 square meters of GLA.

Larger building development is related to more advanced construction techniques, such as tilt-up, which allows building on complicated and fragmented terrains or even increasing ceiling heights for storage without raising costs or compromising the building's stability. Innovations also include improvements to existing infrastructure to facilitate the use of land previously considered unsuitable for industrial development.

On the other hand, the industries based in Tijuana may have favored the supply of relatively smaller spaces. Data from SiiLA and the Mexican Economy Secretariat indicate that this region focuses on manufacturing, particularly in the electronics, capital goods, health, and vehicle and parts sectors, which occupy 45% of the industrial GLA.

However, this factor alone does not explain the peculiarity of industrial buildings in Tijuana, as other markets with very similar business profiles, such as Ciudad Juarez and Reynosa, have buildings that are 24% to 28% larger in comparison.

Even the proximity to the United States, which makes Tijuana a key point for cross-border trade and thus may favor the establishment of companies that prefer more efficient and competitive factories for merchandise distribution, is not enough to explain the situation, as regions like Ciudad Juarez and Reynosa also border the United States and yet have more significant industrial buildings.

Nevertheless, the combination of topographical challenges, a limited supply of industrial land, and high demand for properties, along with the unique characteristics of the local industrial market and macroeconomic factors such as general inflation in the area, which has increased by 16% more than the national average over the last four years, contribute to the fact that average industrial buildings in Tijuana are smaller compared to other northern Mexican regions.

The situation in Tijuana has several implications. Although the size of the buildings may limit the expansion capacity of some companies and even increase some operational costs, space constraints can incentivize the optimization of operations and foster innovation and efficiency in space utilization. For these and other reasons, this industrial market presents challenges and opportunities that make it unique at regional and national levels.

For more information on the development and performance of the industrial real estate market across Mexico, explore SiiLA REsource or contact us at contacto@siila.com.mx.