Banding Together to Face Construction Hurdles

Q: Why are industrial parks an important element for increasing the appetite of foreign investors?

A: Mexico must use industrial parks as a tool to attract foreign direct investment into Mexican industries. According to experts, the element companies consider the most when selecting a market to enter is its size and Mexico has a clear competitive advantage. Not only does Mexico have an extensive list of free trade agreements and a geographical position that enables it to easily trade with NAFTA countries, it has a growing, talented workforce of young engineers that can support industries such as automotive and aerospace.

The success of an industrial park is measured through its occupancy rates and since the country has become a part of the regional production chains of these industries, these rates have remained high. These industries require spaces that facilitate their Just-In-Time and Just-In- Sequence processes, keep their suppliers close by to save on inventory costs and incorporate increased accuracy in terms of timing delivery of the products to the end user. Most people picture the aerospace industry in Queretaro, when in reality it began in the northern region of Mexico, in Baja California and Chihuahua. The industry was already installed and meeting the demands of the US market.

Q: Which sectors will see an increasing demand for industrial spaces in the upcoming years?

A: The Mexican manufacturing industry has grown steadily during the last two years. A vast majority of foreign companies are expecting to export to the US by using Mexico as a logistics platform. There is a strong correlation between the Mexican production market and the market demand in the US, which has led to a small but tenacious increase in the demand for industrial space. The main drivers for the development of industrial spaces are of course the automotive and aerospace suppliers. Distribution and logistics centers require far more sophisticated buildings and services, such as taller roofs, access to more trade routes and security systems, especially with the e-commerce trend swaying the market. E-commerce demands higher process efficiency, which pushes industrial parks to adapt to those specific needs and create more advanced structures.

Q: How can quality standards for industrial parks help bolster the growth of the sector?

A: Industrial developers have united through AMPIP to create a standard that clearly defines what an industrial park is and what it consists of. In most countries, an industrial park is also equivalent to a free trade zone, yet in Mexico the majority of the industrial spaces do not have any tax incentives or customs facilitators. They are considered to be just another real estate project. A committee was created in 1999, that established a standard for industrial parks, including the usage and acquisition of the land, regulation compliance, feasibility of utilities, internal administration and by-laws.

Q: How can industrial park developers meet the needs of the country’s 4.2 million SMEs?

A: The majority of the private companies located in Mexico are SMEs and the industrial parks that form part of AMPIP cater to the needs of medium and large companies. For a developer to create an industrial park, it needs an immense amount of initial investment to acquire land, gather permits, urbanize the area and construct a Class A building. This process can go on for more than two years, in which developers do not have an income and at the same time still pay taxes, which is why many developers are unwilling to construct for SMEs.

Industrial parks have an intricate financial structure, in which the participation of investors has been crucial to the growth of the sector but they require reliable tenants that can guarantee the payment of the lease for many years, and small companies are not always able to give investors this guarantee. This may be the largest factor that steers developers away from creating parks for SMEs. The National Entrepreneur Institution (INADEM) has always shown interest in developing programs to foster the development of spaces for SMEs but the support the government has offered may not been enough. Maybe a program of guarantees would help to encourage the development of industrial parks designed for SMEs.