Beyond Saturn. NEXT Chooses Between Buying and Developing
- Buying a completed building or developing a new one competes for the same capital within FIBRA Next’s industrial growth model.
FIBRA Next confirmed in October the acquisition of two industrial properties in the State of Mexico that will add nearly 500,000 square meters of gross leasable area to its portfolio. However, nearly six out of 10 square meters still need to be built. For now, 207,000 square meters are leased, while the remaining 293,000 square meters will be developed within the trust itself.
The transaction, known as Saturno, involves a total investment of approximately 11.55 billion pesos in acquisitions and development. However, the disclosed information does not detail how the transfer and payments for the space yet to be developed will be structured. It also does not specify who will carry out the construction work. As a result, developing that space within the trust does not necessarily mean the trust will build it directly. However, Mexico’s Income Tax Law (Article 187, first paragraph and Section II) expressly allows real estate investment trusts to acquire or construct properties intended for lease, as well as provide financing for those purposes.
A structure that separates development from the final transfer of a property is already evident in other Next projects. One example is Olimpo, an industrial project in Guadalajara, where the trust reserved 1.3 million CBFIs to continue developing, marketing, and stabilizing Phase 2a. The trust delivered the certificates in January 2026, when the properties were contributed to FIBRA Next and, consequently, to NEXT Properties. At the end of 2025, Next also committed to continue developing approximately 88,780 square meters of Olimpo 2b and reserved another 1.35 million CBFIs, to be delivered once the property was completed and ready for marketing. This shows that Next can commit resources to developing a property before receiving the completed asset and delivering the agreed consideration.
FIBRA Next’s Hybrid Strategy
Regardless of how each transaction is structured, acquisitions and development compete for the capital Next allocates to growth. While FIBRA Next targets capitalization rates above 8% when purchasing income-producing properties, it seeks yields on cost exceeding 10% for development projects. But adding new space through development does not require the company to purchase all the land it might eventually use years in advance, since its relationship with e-Group gives it preferential access to a substantial reserve of industrial land. Next can therefore commit capital to a project when a specific opportunity arises and, once the property is completed and leased, seek to capture the value created during development. According to FIBRA Next’s own estimates, every $100 million invested in development could result in a property worth $133 million once stabilized. The additional $33 million would not represent an annual return, but rather the amount by which Next estimates the value of a completed, income-producing property could exceed the capital invested in its development.
The comparison between the two alternatives is evident within the Saturno transaction itself. The stabilized portion was valued at a 7.25% capitalization rate, while the space slated for development targets a 10.35% yield on cost, a metric that compares expected operating income once the property is stabilized with the investment required to develop it. A similar combination appears in Triple Home Run, another acquisition completed this year, in which the stabilized properties were acquired at a 7.75% capitalization rate, while the development projects target a 10.25% yield on cost.
When Developing Competes With Buying
The model’s potential scale exceeds even FIBRA Next’s current size. At the end of the second quarter, the trust operated around 7.75 million square meters, while the e-Group land reserve it can access has capacity for approximately 12.2 million additional square meters of development. That is equivalent to about 1.6 times all the space Next already had in operation. Access to that land does not, however, mean the company intends to develop all of it or do so at once. Its strategy calls for assets under development to remain below 10% of the portfolio, precisely to limit how much capital is tied up in properties that are not yet generating rental income.
That limit also constrains a different type of exposure than purchasing stabilized properties, since development projects require capital commitments before the income the properties will ultimately generate is known. The expected return must therefore compensate for the uncertainties associated with completion, leasing, and stabilization to make development more attractive than acquiring properties that already generate rental income.
The choice between these alternatives matters beyond Next because it can change how real estate capital is allocated. If completed property prices rise and returns from acquiring them decline, an owner with development capabilities may find it more attractive to allocate capital to developing new properties.
The same comparison applies to other REITs. FIBRA Macquarie, for example, maintained a target yield on cost of 9% to 11% for its industrial developments in 2024, while its management set cap rates for stabilized properties at about 6.5% to 7.5%, depending on the market. The company said simultaneously the historical spread had been around 200 to 300 basis points.
In that scenario, the price of existing industrial buildings would determine not only how much a buyer pays for them, but also when building new ones begins to look more attractive.
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