Nearshoring Investments Stabilize Amid Political Shifts

Nearshoring investments in Mexico have declined amid political shifts in both Mexico and the United States, according to real estate platform SiiLA. The slowdown reflects a stabilization of the nearshoring phenomenon rather than a downturn, as companies adjust their strategies, while established firms expand their presence.

Between 2020 and 2024, more than 1,200 national and foreign companies entered Mexico’s industrial real estate market, absorbing nearly 13 million m2 of industrial space. Foreign firms, which made up 52% of new entrants, sought cost reductions and proximity to the US market, while Mexican companies expanded their role as suppliers to industries benefiting from supply chain reconfiguration.

Compared to the peak of nearshoring in 2021, the arrival of foreign companies has dropped by 31%, while new Mexican companies entering the sector have declined by 43%, reports SiiLA. The trend is also visible in investment data. Between 2021 and 2023, new foreign investments fell by nearly 67%, and preliminary figures for 2024 suggest the downward trend continues. However, total foreign direct investment (FDI) has increased by 7-8% over the past four years due to a near doubling of reinvestment in existing operations.

SiiLA reports that the number of foreign companies already operating in Mexico that expanded their footprint grew by 115% in the last four years. While fewer than 5% of companies typically expand within their first three or four years in Mexico, one in five established firms has expanded in the last five years. Companies such as Ternium, Bosch, Kenworth, Liverpool, Amazon, and Mercado Libre have contributed to this trend.

With industrial space absorption increasingly driven by expansions rather than new entrants, the market faces questions about long-term growth sustainability. Although nearshoring remains a key factor in FDI and space absorption, shifts in global economic conditions and US trade policies could influence future trends.

The northern and Bajio regions have attracted over 80% of new companies entering Mexico in the past four years, with cities such as Monterrey, Guadalajara, and Tijuana serving as key manufacturing and logistics hubs. Last-mile delivery demand has also driven industrial activity in the Mexico City metropolitan area, which accounted for about 15% of industrial demand.

Foreign investors, primarily from the US, China, Germany, and Japan, are expected to maintain their focus on transportation, logistics, automotive parts, and capital goods. While global uncertainties persist, Mexico’s nearshoring market continues to evolve as companies adapt to changing conditions.

US Tariff Threats

Amid Donald Trump’s tariff threats for Mexico and Canada, Claudia Sheinbaum has emphasized her goal of reaching an agreement with the US government to eliminate tariffs before the deadline set by Trump, which was given to achieve results in combating drug trafficking in Mexico. “Our aim is to secure significant agreements on the matter by Friday, Feb. 28. I will seek a call with the President of the United States if necessary.”

Trump announced a 10% across-the-board tariff last week, in addition to the 25% tariffs on steel and aluminum introduced on Feb. 10. Previously, he had announced a 25% tariff on Mexican and Canadian imports, though negotiations, originally set to conclude earlier, have now been extended until March 4. Furthermore, President Trump has instructed federal agencies to explore the implementation of new reciprocal tariffs, a key element of his broader trade agenda.