Industrial Real Estate Expected to Continue Growing

During the month of May of 2021, the gross demand for industrial real estate space in Mexico was 354,000 square meters (m2), giving a cumulative 804,000 m2 for the April-May period, according to figures from Solili, a real estate information platform. During 1Q 2021, total demand was 1.2 million square meters.

Mexico City had the highest industrial real estate demand in the country, representing 21 percent of the total demand. Monterrey and Tijuana were not far behind, both of them registering demands totaling 56,000 m2 and 44,000 m2, respectively. It is important to mention that the automotive, manufacturing and retail sectors are the most active in industrial demand in these cities.

Recently, the company Terrafina, a leading investment trust in industrial real estate, announced it had signed a lease for a 354,000-square-foot lease agreement for a 354,000-square-foot build-to-suit building in Tijuana with a leading e-commerce player. Complementing this new development project, a letter of intent for an additional 200,000 square feet for a packaging company was signed seeking to serve its e-commerce activities. These development projects are expected to require a total investment of US$43.5 million and are expected to generate an estimated US$4.1 million in net operating income (NOI) per year. Both projects are expected to be completed by the third quarter of 2021, according to the company´s press release.

“We are very pleased to close this strategic development in Tijuana, beginning a new phase of growth through new developments in strategic markets. We are convinced that the increase in cash flow reinvestment will enhance Terrafina's possibilities to participate in the strong dynamism of the industrial real estate market, driven by the growing logistics/e-commerce as well as manufacturing activities in the country. We are confident that these changes in our development strategy will enable us to achieve higher NAV growth, while maintaining a disciplined approach to the capital allocation process, all with the goal of reaching a lower level of leverage," said Alberto Chretin, General Manager of Terrafina.

In recent months, Mexico's industrial real estate sector has benefited from a significant increase in demand due to the economic realignment triggered by COVID-19, the implementation of the T-MEC, as well as growth in nearshoring activities, as companies adopt a more regionalized approach to manufacturing processes to achieve greater long-term resilience and lower costs, said Terrafina.

This market is set to continue to grow, mainly due to the increase in e-commerce. As reported by MBN, E-Commerce is pushing development of more Industrial Parks. BTS Development is building the Campus Cuautitlán I Industrial Park and is expected to generate 450 jobs during its construction phase and will total up to 1,500 once it starts operations. The industrial park aims to develop the goods and services purchasing industry in the State of Mexico.