The strengths of industrial real estate markets in Mexico

The entry into force of the USMCA, as well as the expansion of e-Commerce, encouraged growth and demand in the main industrial real estate markets of the country during the first quarter of 2020, thereby confirming that the real estate sector is the leading sector in Mexico.

At the close of the first quarter of the year, the inventory of the 21 most active real estate markets in the country showed an annual growth of 2.68%, reaching 81.8 million square meters. The Northeast region has the largest inventory in the country, with 23.2 million square meters. Specifically, Nuevo Laredo covers 970,937 square meters and has 7.71% of industrial space available.

The country’s vacancy rate stood at 6.26%, with 5.1 million square meters available. It is important to mention that the rate increased by 56 base points compared to 2019, due to inventory expansion, while at the regional level, the Northeast showed the highest vacancy rate, at 6.86%.

In addition, from January to March, the gross absorption in the country was 928,188 square meters, 1.15% higher than the same period of the previous year.  

However, construction starts had an annual drop of 27.34% and a quarterly drop of 11.03%, when only 559,646 square meters were built. From January to December 2019, this indicator showed a 3% increase year on year, but in the last quarter it decreased slightly compared to the same quarter, that is, the drop in construction starts in the first quarter of 2020 was not sudden, but it could have been aggravated by the government’s decision not to treat the construction sector as essential, at the same time as some developers decided to suspend speculative projects in order to preserve liquidity.

USMCA as a driving force in automotive manufacturing and logistics

With the entry into force of the USMCA, the demand for industrial spaces in the country’s main real estate markets has been maintained and, in some cases, increased by companies in the automotive sector.

This boost is attributable to the change in the USMCA’s rules of origin, which calls for an increase from 62.5% to 75% of the regional content required for commercialized vehicles to be exempt from tariffs. 

In this regard, the Northeast had a very dynamic gross absorption due to automotive company transactions, since one out of every three square meters requested for leasing was for manufacturing in said industry, which included new operations and company expansions.

Oradel Industrial Center is located in Nuevo Laredo and offers international companies space for the construction of industrial buildings, based on their operational necessities.