The concept of nearshoring is echoing in Mexico and various parts of the world. This term is used to describe a business practice in which a company hires services, establishes operations, or expands in countries close to the region where its customers or primary consumer market are located. The objective of nearshoring is to seize the competitive advantages of producing overseas with lower production, distribution, and logistics costs. In Mexico, nearshoring has been consolidating for several decades but is currently driving unprecedented industrial growth. According to data from SiiLA Market Analytics, the existing industrial area in the country has increased at an average annual rate of 30% in just the last three years.

As a business strategy, nearshoring implies increased profitability due to cost reduction in labor, inputs, space occupancy, and transportation. In addition to economic benefits, nearshoring also offers operational efficiency and quality control advantages. By keeping operations close to target markets, companies can have greater control over the supply chain, facilitating communication, monitoring, and problem-solving. This results in faster decision-making and reduced delivery times, which, in turn, strengthens companies' market competitiveness.

These mentioned benefits have positively impacted the commercial real estate market, both in Mexico and in various parts of the world. For example, in Mexico, there has been a significant increase in the construction and occupancy of industrial parks and distribution centers near the border with the United States. This growing demand has created an opportunity for real estate developers, driving market growth and diversification. In the last three years, industrial properties' gross leasable area (GLA) practically doubled in Saltillo, Monterrey, Tijuana, and Ciudad Juarez. These markets have a strong presence of companies in the vehicle and parts, capital goods, electronics, and transportation and logistics sectors, which occupy nearly 56% of the existing industrial space, according to SiiLA.

Nearshoring has not only presented development opportunities for Mexican companies, which occupy almost 26% of the industrial GLA in Mexico. It has also driven the arrival and expansion of US companies, occupying over 33% of the industrial GLA, and Asian potencies like China, Japan, and South Korea, which collectively occupy 16.5% of the existing space. In general, Market Analytics data indicates that between the first quarter of 2020 and the first quarter of 2023, the occupied area by Mexican companies increased by 70%, while the occupied space by foreign companies increased by 100%.

According to Alejandro Delgado, Country Manager Mexico at SiiLA, "We are currently experiencing a historic moment in the industrial real estate market, as in addition to the growing number of deliveries, the availability rate is at historic lows, and the average market price of industrial warehouses is at historic highs, indicating an expanding market." In that sense, Delgado indicated that the challenge would be to develop new industrial regions in the country since, currently, over 80% of the existing industrial space is in the Northern and Bajio regions of Mexico, where there is a surplus demand for spaces and practically no availability in some markets.

Nearshoring is not new or temporary. It is expected to continue for many years, generating growth and economic benefits in various regions globally, with potential market diversification and increased economic competition. If you are interested in learning more about this and other commercial real estate market trends, visit SiiLA or contact us at contacto@siila.com.mx.