Negative Net Absorption in Mexicali: A Setback or a Strategic Shift for Companies on the Northern Border?

Not all industrial markets closed 2024 on a high note. Mexicali is one of them. In this region of northern Mexico, the area recorded negative net absorption for the first time since SiiLA began tracking data. This is due to several factors.

Over the last two years, new inventory deliveries and absorptions have slowed in the region. Still, absorptions have dropped more quickly than new inventory, reducing the gap between supply and demand. At the same time, a high tenant turnover has been observed: between 2023 and 2024, for every square meter absorbed, half a square meter was vacated, according to SiiLA Market Analytics data.

When a market combines limited absorption and high tenant turnover, the result is, among other things, reduced flexibility in occupying existing inventory. This is reflected in the data, which shows that nearly 40% of the properties delivered in the last two years in Mexicali’s industrial market are partially or fully available. As a result of these factors, the vacancy rate in the region has increased by 30% over the past year, rising from 3.4% to 4.4%.

Speculative inventory has played an essential role in the region. While it has been a strategic bet, many projects in Mexicali have been developed with the belief that its proximity to the U.S. border and the natural expansion of the area ––compared to the limited capacity of Tijuana, a market restricted by the mountains surrounding it–– would result in constant demand. However, demand has not met expectations.

Examples of this trend include properties in major industrial parks, such as the Ignis warehouses at the Vie Verte Business Center 2.0 by Grupo IAMSA and warehouse “2” at Sendero Industrial Park by developer Hermosillo, which have experienced some degree of vacancy for a period longer than the average marketing time in the region.

Despite this, Mexicali’s industrial market shows positive signs. Even with increased vacancy, it remains below 5%, reflecting that, despite the challenges, the market is still relatively stable. Additionally, rental yields have remained strong, with an average price of $6.4 per square meter. This makes it competitive compared to other border markets like Ciudad Juárez and Tijuana, where prices range or exceed $7 per square meter.

The contrasts in the region indicate that the market is undergoing an adjustment and maturation process, which could generate new absorption opportunities as economic conditions and supply-demand expectations stabilize. A key factor will be the performance of industries operating in the region.

Mexicali focuses on the manufacturing of electronics, health products, and motors. While the electronics industry saw a 13% decline in international sales in recent years, the health and machinery industries have experienced growth ranging from 40% to 50%, according to the Mexican Economy Secretariat. This capital and industry shift reflects a transformation in the region’s productive structure, which could temporarily limit foreign investments.

It is important to note that more than 80% of the companies in Mexicali are Mexican and U.S.-based, which puts this real estate market in a strategic position, especially now that the USMCA is being renegotiated. This business composition may help mitigate the impact of political fluctuations and economic shifts, providing greater stability in a context where trade relations between Mexico and the U.S. face challenges, such as tariff threats and the protectionist approach pushed by the Trump administration.

For more information on the performance of the industrial real estate market, visit SiiLA REsource or email us at contacto@siila.com.mx.