Liliana Reyes
Mexican Association of Private Capital (AMEXCAP)
Expert Contributor

Growth of Industrial Parks: Positive Investment Results

By Liliana Reyes | Tue, 07/19/2022 - 15:00

Mexico continues to be an attractive player for private capital investment by foreign companies looking to move their manufacturing to the Americas and become suppliers to large US companies. In this context, industrial parks have a very important role to play in attracting foreign investment as they meet the high demand for space by companies that are coming to the country.

Among the reasons benefiting Mexico are the relocation of companies motivated by the tensions between the US and China, the search for solutions to supply chain problems caused by the COVID-19 pandemic, the conflict between Russia and Ukraine as well as the new USMCA rules.

The Foreign Direct Investment (FDI) report by the Ministry of Economy indicates that for the first quarter of 2022, foreign investment stood at US$19.427 billion. This figure represents a little more than half of the FDI registered in 2021, which amounted to US$31.621 billion.

The numbers show that there is a genuine interest in moving companies to our country, especially now that the world is recovering from the coronavirus pandemic and seeking to accelerate the economy worldwide.

The report by the Ministry of Economy indicates that investments in manufacturing represent 24.2 percent of foreign investments, followed by 19.4 percent in the information and mass media sector, 17.2 percent financial and insurance services, 15.3 percent transportation, 7.3 percent construction, and 5.8 percent in mining.
The arrival of foreign companies has also increased interest in industrial parks. In fact, in 2021, the occupation of industrial spaces tripled, as around 100 companies arrived in Mexico from Asia and the US, according to data from the Mexican Association of Private Industrial Parks (AMPIP).

The government has also seen a growing interest in the country's industrial parks. A few months ago, Minister of Finance, Rogelio Ramírez de la O acknowledged that the parks in the north of the country were becoming saturated.

Therefore, it is no surprise that Monterrey leads the list of cities with the highest concentration of industrial parks. Data from the consulting firm CBRE show that for the last two years, Monterrey has accounted for 50 percent of the demand for industrial space nationwide.

However, other cities, such as Tijuana and Ciudad Juárez, are also registering an increase in the occupation of their industrial spaces. This could be thanks to three crucial factors for growth: availability of skilled labor, abundance of land available for development, and solid levels of exports to the US.

Sustained growth in this sector makes us think about the importance of attracting private capital to our country. Undoubtedly, Mexico has many advantages, among which the following stand out:

- Ecosystems of innovation and development that have formed in the center and north of the country, in which industrial parks, clusters, and R&D centers work together to develop innovation projects for productive purposes.

- A young, specialized, skilled, and competitive labor force compared to that of the United States and with the same capabilities as those of China.

- The transformation of the country to become a key player in global value chains, with a successful case in the automotive industry.

In addition, Mexico is a leader in key sectors such as aerospace, medical devices, pharmaceuticals, electronics, construction, renewable energy, processed foods, telecommunications, furniture, and biotechnology.

The growth and positioning of the country in the different industries compel us to promote private capital investment, both domestic and foreign, in industrial parks and in the industry in general to maintain the nation's economic growth.

Private equity funds in Mexican real estate have a historical accumulated committed capital of more than US$23 billion, with a historical investment of around US$11.8 billion, which have been allocated to more than 389 projects.

Private equity investment in the real estate sector has had an annual growth of 9 percent in the last 10 years, maintaining an average investment in each project of around US$30 million.

It is worth noting that we have at least US$350 million available for investment in the short term. Additionally, in 2021, at least eight new investment vehicles were raised for the real estate sector with an amount allocated to Mexico of more than US$747 million to be used in the medium term.

The investments made in the last two years by these private equity funds have been increasing, registering an investment average higher than that observed in previous years.

In addition to economic growth, the industrial park sector is becoming increasingly attractive due to its alignment with environmental, social, and corporate governance (ESG) best practices.

The document, "Roadmap: New Generation of Smart and Sustainable Industrial Parks," published by AMPIP, sets out a comprehensive vision that all industry players can commit to in order to meet the 2030 goal: all industrial parks in Mexico must be smart and sustainable.

The roadmap includes medium-term goals. This year, the sector must have a standardized information system for the parks and their industrial activities ready; by 2025, it is expected that one-third of the industrial parks will have already adopted Industry 4.0 technologies.

To achieve this goal, the association calls for compliance with international standards and certifications, such as LEED, which guarantees energy savings in buildings and other environmental indicators; the WELL standard, which seeks to improve the health and well-being of people in buildings; and the B-Corp standard, which evaluates the balance between profit generation and its impact on workers, suppliers, the community, and the environment.

Undoubtedly, the real estate segment of the industry will maintain the growth it had, even during the health crisis, if investment continues as it has been up to now.

Photo by:   Liliana Reyes