Delays in Permits Hinder Industrial Space Development: AMPI

Extended timelines for opening industrial spaces are hindering Mexico's ability to meet nearshoring demands, according to the Mexican Association of Real Estate Professionals (AMPI). Delays in the development of new real estate projects are prompting Asian companies to explore alternative options for establishing factories, the association stressed.

According to Karim Oviedo, Vice President, AMPI, overregulation is adversely affecting the industrial real estate market, as bureaucratic procedures can take up to 18 months. Oviedo pointed out that Asian companies canceled their plans to open factories in the country because they had anticipated bureaucratic procedures to take no more than four months before commencing construction of their facilities. 
 

According to AMPI, companies need to make at least 200 visits to public offices to obtain permits for construction and land use. Oviedo emphasizes that to attract companies, the real estate sector must ensure that the land is equipped with the necessary features. In response to this need, the association is initiating a project to develop land in collaboration with what AMPI refers to as investment ambassadors. “We need to prepare the land first to attract investment. Instead of saying 'Let us bring in the investment,' we should first determine how much land we have, where the feasibility lies, and if we will truly have water, electricity, gas, and internet for the companies,” he added. 

The challenges in developing new industrial spaces have consistently been highlighted by industry insiders. At Mexico Business Summit 2023 (MBS 2023), Héctor Ibarzabal, Managing Director for Mexico, Prologis, disclosed that it takes 36 months to develop new industrial complexes. 

Increasing timeframes raise concern as industrial space demand is expected to surge significantly in the coming years. According to Sergio Argüelles, President, Mexican Association of Private Industrial Parks (AMPIP), between January and August 2023, over 22% of the absorption of industrial space among AMPIP members was a consequence of nearshoring, representing over 3 million m². He also predicted a demand for over 2.5 million m² between 2023 and 2024, which nearly doubles the square meters absorbed in 2022, as reported by MBN.  

The lack of industrial space is not the only challenge Mexico faces in the context of nearshoring. Industry insiders have stressed the importance of developing proper public infrastructure to address the needs for water, connectivity, and energy. In an interview with MBN, Javier Llaca, Co-Founder and Chief Operating and Investment Officer, FIBRA Monterrey (FIBRA MTY), outlined the need for logistical infrastructure like roads, airports, maritime ports, and railroads. Llaca also stressed the need for essential services for industry, which include energy, water, drainage, and gas. 

Similarly, Izabarral emphasized the need for collaborative efforts to improve infrastructure, expressing concern that Mexico might miss out on the nearshoring boom if these issues are not tackled.  “The nearshoring activity could be up to three times what is currently taking place if we had the capabilities today," he stressed during MBS 2023. 

Although industry insiders see nearshoring as a significant opportunity for Mexico, the Mexican Institute of Finance Executives (IMEF) advises against "overselling" it, cautioning that the benefits may not materialize in the short term. IMEF emphasizes that the country needs to address ongoing structural challenges related to infrastructure, workforce shortage, and efficient resource allocation.