Industrial Land Prices Rise by Up to 60% in Mexico’s Central and Bajio Regions

According to specialized brokers, industrial land prices have increased between 30% and 60% in Mexico's Central and Bajio regions over the past four years. This increase is attributed to the high demand for industrial spaces, the influx of foreign investments, and macroeconomic factors such as inflation and exchange rates.

In Queretaro, for example, land prices have soared to $195 per square meter. Valeria Luna, an expert in business development and market trends with extensive experience in real estate transactions, explains that this is not only due to the scarcity of suitable industrial land but also to negotiation expectations and high demand from national and international companies looking to establish themselves in the region.

"Many companies seek strategic investment opportunities in Mexico," Luna said. In the Mexican context, strategic considerations heavily involve property prices. According to Luna, companies of all sizes look for "good, beautiful, and cheap" properties. She explained to SiiLA that while most companies initially aim to pay below market prices, their perceptions change dramatically once they see the quality of the land and facilities, leading them to adjust their expectations.

"Due to high prices, companies generally prefer to rent warehouses rather than buy land for their projects," Luna added. To illustrate, she mentioned the case of a significant Asian electronics company that acquired 90,000 square meters in the Kaizen II industrial park in Queretaro.

"This type of investment involves land acquisition, adaptation, and construction works, as well as the operational maintenance of the company, which includes staffing and maintaining operations until the project is completed," Luna noted. She also pointed out that while many companies intend to buy and develop, only some have the capital necessary to invest in such ventures.

Marco Duran, Director of Industrial Transactional Services at Colliers, agrees with Luna. With over 20 years of experience in sale-purchase and lease transactions, Duran stated, "In Mexico, leasing is preferred over buying because it offers companies more flexibility to adjust their operations—whether to expand, downsize, or relocate—without requiring a significant initial investment." However, he noted that companies with production plants often opt to buy to ensure long-term property control and amortize investments made in infrastructure and specialized technology.

Higher Land Prices Lead to Higher Rents

Limited supply and high demand, inflation, high interest rates, lack of fiscal incentives, and exchange rates have driven the national market price of industrial land upward. This revaluation further pushes up rental and sale prices of industrial buildings, which were already on the rise due to increasing costs of materials, machinery & equipment, and wages in the construction sector, which have risen by 31%, 12%, and 26%, respectively, over the past four years, according to INEGI data.

"In Mexico, industrial land is scarce due to specific requirements for development projects, such as land use permits, good access conditions, and service infrastructure. This situation is further exacerbated despite the existence of some industrial spaces that have outlived their usefulness and, due to urban dynamics or zoning issues, tend to be converted into commercial or residential spaces, leaving industrial land use behind," Duran explained.

Data from SiiLA Market Analytics indicates that depending on the industrial market and transaction type, average rental and sale prices have varied between 15% and 33% in the Central and Bajio regions over the past four years.

Flexibility and Adaptation: Keys to Driving Investments

With rising prices, keeping properties competitive is about adhering to market benchmarks—like standard prices and profit margins— and offering quality and flexibility to meet client needs and ensuring fair payment amounts and terms to make investments profitable for both property owners and buyers or tenants.

Valeria Luna believes that flexibility allows companies of all sizes to enter new markets, especially startups and small businesses with limited liquidity or capital. She explained that "there are even short-term rental contracts (no more than six months) for companies looking to meet seasonal production demands. They rent additional temporary spaces to expand storage or production areas and vacate the space when the high sales season ends."

Marco Duran of Colliers indicated that rising prices have made users and investors more stringent. While users or tenants have increasingly strict requirements to ensure competitive rents or obtain contractual benefits, developers and investors "remain eager to buy sites but are cautious about land costs to avoid having properties with non-competitive rental prices. This applies to greenfield developments (land being developed for the first time) and brownfields (where old buildings are demolished and replaced with new construction). Consequently, many transactions are slowing down."

Overall, brokers' outlook reflects a highly valued industrial market whose future will depend on companies' ability to adapt to changing conditions and capitalize on strategic opportunities.

For more information on this and other commercial real estate topics, explore SiiLA REsource or contact us at contacto@siila.com.mx.