Nearshoring Benefits Many Sectors Beyond Industrial: AMEFIBRA

Q: What initiatives has AMEFIBRA launched to support its members? 

A: AMEFIBRA comprises 15 members who collectively own over 2,000 properties, with more than 30 million m² of gross leasable area (GLA). These assets represent a total investment of  MX$800 billion (US$43.1 billion). These properties constitute 4.5% of GDP and contribute about 4% of the national property tax (predial). The sector has a market capitalization of MX$450 billion and is a leader in ESG. 

AMEFIBRA’s membership is divided into seven segments: industrial, offices, shopping centers, educational institutions, hotels, self-storage, and agro-industrial. We act as the voice for all FIBRAs, advocating before authorities and the broader investment community. AMEFIBRA has five active subcommittees: normativity and securities market, legal issues, CFO workshop, sustainability, and HR, promotion, and education, which is the committee that organizes events like the annual FIBRA Day in New York.

Q: What were the objectives behind the launch of FIBRA Day and why does it take place in New York? 

A: The event has become a benchmark in the sector, with this year marking its sixth edition and the third time in New York. The event aims to familiarize investors and companies with FIBRAs, which are a relatively new investment vehicle in Mexico but are experiencing exponential growth. 

After the event in Mexico in 2021, we found that 30% of investors are foreign, so we decided to host the event in New York to connect with these investors. We have seen positive results, particularly in the number of participants and the increasing presence of foreign companies at the event. We are receiving more and more requests from companies and foreign speakers who want to participate.

Q: What lessons can Mexican FIBRAs learn from US real estate investment trusts (REIT)?

A: The United States has had REITs for over 60 years. A total of 41 countries, including Mexico, have adopted the REIT model. Mexico has had REITs for 12 years, starting with FIBRA UNO. In the United States, REITs provide training for members and stakeholders, while highlighting effective communication through events such as REIT Week. We have made efforts to align ourselves with the best practices of the US market. The US market is large and professional, and we have adopted some aspects of its model to guide our own path.

Q: What are the main concerns of both institutional and retail investors when investing in FIBRAs? 

A: Investors in the sector face real estate cycles. There was a time for offices, a time for shopping malls, and there is now a significant industrial boom due to nearshoring. Investors typically either follow the cycle or bet on sectors that are not in their current cycle for future returns. It depends on each investor's vision and risk appetite, as well as the expected returns.

However, many investors are paying close attention to ESG issues in their investments. We have observed that new, younger investors analyze the environmental and social impact of investments closely, as well as the transparency of companies in reporting. This is an area where there is a great deal of work to be done, but where there is also a significant opportunity for FIBRAs.

Q: What are the main factors that could hinder the growth of FIBRAs, especially considering that nearshoring brought dynamism to the industrial sector?
A: There is exponential growth in the industrial sector. In 2023 alone, the industrial sector grew by 5 million m². AMEFIBRA’s members added 2 million m². Some factors serve as both barriers and opportunities for the growth of this industrial cycle. One factor is energy. Without energy, an industrial warehouse will not function. Energy generation and distribution is among the most important challenges that need to be discussed between the public sector and the government.

Another challenge is water supply. While there is water in Mexico, it is necessary to invest in water infrastructure. Road infrastructure is another challenge, as productive companies need it to deliver their goods. There are already bottlenecks on roads and the access roads to the US market are saturated, making it necessary to invest in infrastructure. Another important issue is skilled labor. Nearshoring will increase demand for talent, which means more schools, universities, and technical schools. 

Q: How is AMEFIBRA measuring the effect of nearshoring on the Mexican economy?

A: Nearshoring was happening before the pandemic, but the outbreak led to the regionalization of production chains as companies wanted to produce near their final consumer, often the United States. During the pandemic, industrial warehouse space grew by 70%. Regionalization aims to make supply chains more accessible to the nearby market, bringing a long-term opportunity that Mexico should capitalize on. Mexicans are hard workers, creative, and deliver good results. With a little more training, this trend could bring a permanent transformation.

Q: What sectors are poised for growth during the next six years? 

A: Nearshoring will drag all of society toward a better future. FIBRAs could capitalize on industrial demand as there are companies focusing on educational buildings. The push for business and manufacturing in Mexico, coupled with the drive for professionalization, is leading to increased demand for education and training. This growth is expected to extend to schools and commercial centers, driven by an influx of employed individuals with improved economic capacity. As a result, office occupancy rates, currently at 87%, are expected to rise. Occupancy rates for Industrial warehouses are already high, at 98.5%, and they are expected to rise further due to the arrival of new companies.

Energy FIBRAs also play a crucial role in this scenario. Housing, not covered by FIBRAs, is also witnessing significant growth. There is rising demand for affordable and well-located housing, a key consideration for urban planning and mobility to ensure access to the necessary employees.

Q: How do FIBRAs’ properties help foreign companies to make their operations more sustainable and ESG compliant? 
A: Investing in a company, such as FIBRAs, that prioritizes transparency and continuously professionalizes its corporate governance is crucial. ESG principles lead to profitable business practices. An inclusive company benefits from diverse opinions, enhancing profitability. A FIBRA that focuses on the quality of its properties increases user satisfaction, resulting in higher return rates to commercial centers, for example. Proactively addressing climate change by ensuring sustainable construction leads to cost savings. Using AI to measure the impact on properties and tenants is an essential aspect of ESG, providing not only economic benefits through savings and consumption reductions but also accident prevention. These benefits are lasting and reflect a trend that is here to stay.

ESG brings significant cost savings in real estate and property management. Another critical aspect is certification. Our focus on ESG certifications increased our certified square meters from 2.5 million in mid-2022 to 6.5 million in 2023. Inclusion is also crucial in the predominantly male real estate sector. The participation of women and individuals from diverse communities and lifestyles makes the industry more inclusive, diverse, and profitable. 

Q: What are AMEFIBRA’s plans for the next six years to promote FIBRAs as a trustworthy and safe investment vehicle? 

A: In the near term,  we will adapt to the new federal administration and then focus on growth, hard work, and promotion. In 2024, we estimate that the market will absorb about 7 million m² of the new industrial spaces being constructed, some of which will belong to AMEFIBRA’s members. We anticipate changes among some of the FIBRAs due to the market boom and its growing maturity. We hope to see new FIBRAs emerging and significant growth in existing instruments. These are solid instruments and all 15 FIBRAs, whether sector-specific or multisectoral, have been increasing their square meters.

Last year, FIBRAs saw returns nearly 8.7 points higher than one of the main indexes. The FIBRAS TRAC by BBVA, for example, outperformed the IPC. The IPC had a 22% return, while the FIBRAS TRAC posted almost 29%, making it an attractive investment.

AMEFIBRA’s objectives are primarily promotion and transparency. We are engaging with the incoming administration to discuss what we need from them and what they need from us to delimit responsibilities.

The Mexican Association of Real Estate Investment Trusts (AMEFIBRA) represents 15 real estate investment trusts (FIBRA) that operate in various real estate segments in Mexico, including industrial, retail, hotels, and offices. Its main objectives include representing FIBRAs before authorities, promoting a unified voice for the sector, and seeking continuous growth for its members.