Q3 2024: Nearly One-Third of Mexico’s New Industrial Inventory Hit the Market Vacant. Why?

Although the mismatch between new vacant inventory and average demand was evident nationwide, a closer look by region reveals key differences that nuance this trend.

In some areas, the delivered inventory far exceeded demand, while supply was better aligned with tenant needs in others. These regional variations highlight the distinct characteristics of each market and offer a clearer picture of how different regions performed in Q3 2024.

In the Bajío region, for example, the average size of the newly vacant inventory was 78% larger than the average size of the space absorbed in the region. In contrast, the North region saw only an 18% difference, reflecting a closer alignment between what is being built and what is being occupied. Meanwhile, the Central region saw a 47% difference, showing a mid-range trend.

Regional discrepancies also extend to specific markets, where the supply and demand dynamics present even sharper contrasts.

In markets like Monterrey and San Luis Potosí, the average size of vacant inventory was smaller than the absorbed space, with differences of 43% and 23%, respectively. This phenomenon does not necessarily indicate a preference for smaller spaces but rather a misalignment between supply and the market's actual needs.

Since 2020, the average size of absorbed spaces has steadily increased, reflecting a growing demand for larger warehouses, particularly in the North and Bajío regions. However, when the supply does not fully match the required size—whether due to a lack of sublease agreements that could allow for space segmentation or a shortage of land for expansions—the pool of potential tenants for these properties narrows.

Conversely, in markets with the largest discrepancies, such as Mexicali, Querétaro, Aguascalientes, and Guadalajara, the size of the new vacant inventory was between two and five times larger than the average absorbed space. This mismatch suggests that the properties far exceed the market's immediate ability to absorb them in these markets, either due to size or quantity. As a result, the larger or more numerous deliveries may not be as competitive as other options better suited to current tenant needs, potentially slowing their occupation.

In most markets, the gap between supply and demand shows that the delivered inventory almost doubles the absorption rate. This landscape emphasizes the need to align the size and features of new developments with each market's specific requirements to improve absorption rates and reduce vacancy.

This highlights the fact that the challenge lies not in building more or bigger but in the ability to anticipate and adapt in a constantly shifting environment.

In an industrial market where competition has intensified with the delivery of new inventory—by institutional players and less sophisticated entrants venturing into property development—having detailed supply and demand information, like that provided by SiiLA, offers a competitive edge. This insight enables developers and investors to adjust their strategies in real-time.

Want to know the main trends in the commercial real estate market? Check out SiiLA Market Analytics or contact us at contacto@siila.com.mx.