In the Mexico City metropolitan area's industrial real estate market, the costs associated with toll fees on the outskirts of toll plazas on highways connecting to Mexico City represent one of the most significant barriers to company establishment and expansion.

According to Marco Duran, Director of Industrial Transactional Services at Colliers, areas just outside this perimeter, such as Tepeji, Huehuetoca, and others in the State of Mexico and Hidalgo, show considerable potential for industrial development. They are distinguished by their lower costs in land purchases and industrial space rentals compared to Mexico City. However, toll rates on major roads like the Mexico-Cuernavaca, Mexico-Pachuca, Mexico-Puebla, and Mexico-Queretaro highways significantly increase logistical costs for companies that need to transport goods to and from the center and other metropolitan areas of Mexico City.

Data from the Mexican Communications and Transportation Secretariat indicates that truck tolls on these significant highways range from 129 to 1,245 pesos (from seven to 69 dollars) per crossing, depending on the number of axles on each truck's semi-trailers.

"For industrial companies to absorb the costs of toll booth crossings, they need to have certain production and distribution volumes," explained the experienced broker from Colliers.

The cost of the toll booths can be particularly prohibitive for small and medium-sized enterprises or those in industries with lower profitability. This is especially significant considering that in the central region of Mexico, the price of land for industrial use has been increasing over the past four years, partly due to the scarcity of land with specific characteristics for industrial use and partly due to insufficient supply against sustained demand. As a consequence of the rise in the purchase price of land, exacerbated by an increase in construction costs due to rising material prices, the cost of renting spaces has increased by 30% to 40% since the pandemic, mainly due to the over-demand for distribution centers by e-commerce, logistics, and retail companies.

Marco Duran explained that the country's central area is closely linked to these sectors, focusing on the final stage of the supply chain, where products are distributed to the final consumer or the last distribution channel. In this regard, data from SiiLA Market Analytics indicates that the main tenants of the industrial market in the Mexico City metropolitan area are transportation and logistics companies, which occupy about 23.3% of the gross leasable area.

Since companies focused on the final consumer and logistical processes tend to prefer renting rather than buying land because renting offers companies more flexibility to adjust their operations, whether to expand, reduce, or relocate without a significant initial investment, the increase in leases and the cost of toll fees put additional pressure on companies' finances, reflecting how operating expenses significantly influence the strategy and economic viability of companies in the industrial real estate market.

"That's why we see that, in general, large companies like Liverpool, The Home Depot, and Walmart can have distribution centers on the outskirts of Mexico City. This is because their volumes allow it. In the medium term, and due to a lack of space, we might also see medium-sized companies looking to consolidate their operations to achieve those volumes, or even some small groups or conglomerates of companies looking to modify their business models to share certain operations and achieve specific masses and synergies that allow them to share locations and services to have these economic efficiencies," explained the executive from Colliers.

Challenges and Perspectives

The economic barrier represented by the toll booth fees is a central axis in discussions about urban development and planning of Mexico's industrial real estate market. These fees limit the decentralization of industrial activities and restrict the expansion necessary to accommodate population growth and its increasing purchasing power. Such expansion is limited not only by the high costs of tolls but also by natural barriers such as the Sierra de Cuajimalpa and La Marquesa, which prevent, for example, development to the west of Mexico City.

These factors mean that, as the need for consumer goods continues to grow and drive the development of new production plants and distribution centers in the Valley of Mexico, the increase in tolls on key routes (3% on average in the last year) will act as an additional brake for some companies and productive sectors. Therefore, it is essential to reconsider the structure of toll fees to promote more inclusive and sustainable growth at the industrial level and also to ensure that economic and geographical limitations do not confine development.

Future planning must contemplate innovative strategies that maximize the efficient use of available space and allow for a more equitable distribution of industrial activity. This is necessary not only to address the current shortage but also to prepare for the future needs of an industry in constant evolution. Ultimately, mitigating the challenges posed by toll fees and other structural barriers will be crucial to ensuring the sustainability and competitiveness of Mexico's industrial real estate market.

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