STORY INLINE POST
Q: How have inflation and the subsequent increase in interest rates impacted property purchases and real estate market dynamics?
A: Despite the efforts with monetary policy to control escalating price increases, Mexico registered the highest percentage of inflation in the past 20 years at the beginning of 2H22. This affected the construction industry, which is still recovering from the COVID-19 crisis. Among the most affected sectors, commercial, corporate offices, housing and tourism stand out. On the other hand, the demand for industrial space has increased exponentially. The industrial real estate sector has boasted the greatest stability and growth, mainly in essential markets such as logistics and manufacturing. Among the regions with the highest demand for industrial space are Monterrey, Tijuana, Ciudad Juarez and Reynosa, as well as Guadalajara, the Bajio, the State of Mexico and Mexico City’s metropolitan area.
The rise in construction costs added to the limited availability of industrial space has generated a considerable increase in industrial rental prices, an issue that was more noticeable in 1H22. The markets on the northern border that remain dollarized have been more effective in absorbing the increase in the rental price of industrial spaces.
Q: What new materials and technology trends are being incorporated into commercial and industrial real estate?
A: The trend toward the development of sustainability for industrial, commercial and residential real estate is significant. Here, the aim is to increase efficiency, reduce operating costs and generate better workspaces for users. This is achieved through the Leadership in Energy and Environmental Design (LEED) certification, an internationally recognized system developed by the US Green Building Council. Importantly, sustainable properties set themselves apart by providing better capital gains and because of their growing attractiveness to investors and users.
Q: How have investment opportunities for industrial real estate in Mexico evolved throughout the past two years?
A: Mexico represents a great opportunity for industrial real estate development. This is due to different variables, among them the demand for products in the US, a high level of domestic consumption and prolific foreign trade backed by agreements that facilitate access to international markets and reduce import and export taxes. In addition, the country has a strategic geographical position for global trade. It also offers good industrial and logistics infrastructure, a consolidated local supply chain and qualified, accessible labor.
Nearshoring turned out to be an efficient solution to optimize supply chains, causing companies from Asia and Europe to transfer their production to Mexico, which has greatly boosted the dynamism of the industrial real estate sector in the country. Among the markets that benefit most from nearshoring are the electronics and automotive industries, as well as their entire value chains.
Q: How are industrial developments in the automotive industry evolving and how do they impact the real estate industry’s recovery and growth?
A: The automotive industry is a market of great importance for the development of the industrial real estate sector in Mexico. In 2022, we have seen more dynamism than in previous years. Many of our clients are from the automotive industry and most are planning to expand their operations considerably in the next two years, as well as adapt and modernize their facilities to produce electric cars. There is a need in the automotive industry to develop a specialized supply chain. This demands new industrial spaces, among which build-to-suit projects and speculative warehouses stand out. The recent expansions in automobile assembly plants, located mainly in the Bajio, San Luis Potosi, Nuevo Leon and Puebla, are positive indicators that reflect the growth of this industry.
Q: What complementary infrastructure is adding value to industrial real estate?
A: There are many factors involved for an industrial client to decide to land in Mexico. The site selection study is the first step that companies take to evaluate their new location, in which they evaluate the availability of space and talent. In addition, clients look for tax and administrative incentives that will benefit their investment. The availability of a local supply chain also plays an important role, since this optimizes costs and company operations.
Another area within the complementary infrastructure demanded by industrial parks and manufacturing is the availability of reliable and affordable energy, and increasingly, clean energy. The lack of energy feasibility has been a constraint for new companies to establish themselves in Mexico.
Soft infrastructure also plays an important role in the decision to develop new industrial infrastructure. This includes educational, health, mobility and entertainment services that provide well-being to personnel working in the factories and industrial parks. The development of this living infrastructure, complementary to the industrial spaces, is fundamental to attracting industrial investment.
Q: What are Cushman & Wakefield’s main goals in Mexico for the near term?
A: We are a leading global real estate company. The main services that we offer our clients are brokerage, Project Management (PDS) and facilities management, among others. Our project management line has established itself as one of the main alternatives for any type of industry that seeks to expand or develop new industrial facilities in the country. Through our service, we guarantee our clients that their industrial projects are developed under the best practices of engineering and construction industry, taking care of their project resources, quality and execution time. It is essential to continue consolidating long-term relationships between all the actors that promote the industrial and economic development of the country as well as adapting to the new requirements of the market and emerging industries.
Cushman & Wakefield is a leading global real estate services firm with over 100 years of experience. It is based in the US and has approximately 50,000 employees across more than 400 offices in 60 countries.