Manuel Barreiro
Partner
Advance Real Estate
/
Insight

Taking Care of Smaller Businesses

Tue, 11/01/2016 - 15:03

The automotive and aerospace industries have grown exponentially in recent years, especially in Queretaro and the Bajio region. Advance Real Estate is taking advantage of the boom to cater to the needs of not only the OEMs but also SMEs by providing space at its “business parks.” Business parks are essentially the same as industrial parks but on a smaller scale. They are designed to target the needs of Mexican SMEs and expand the supply chain to include smaller local companies trying to improve their quality and working environment in the new industrial Mexican market, says Manuel Barreiro, a Partner at the company. “SMEs represent about 70 percent of manufacturing in Mexico, yet are mostly ignored by the larger players in the industry,” he says. “For us, it is of the utmost importance to support them through uniquely  designed services specific to their needs. These parks have been well received by the industry and a few large automotive companies have certified SMEs in our parks so that they can become suppliers.”

Barreiro echoes a common refrain that the largest problem developers face is Mexico’s lack of infrastructure, especially in terms of electricity. “Lack of infrastructure, high prices and an unclear regulatory structure for the free power market create entry barriers for many clients who wish to expand into Mexico,” he says. “The Energy Reform has promised to improve this but it is still under development and there remains a degree of uncertainty about how it will evolve.” The company’s is addressing the problem by developing the electricity infrastructure within its parks.

Another common problem is the need for skilled human capital. Advance has a social program in place to support education in local communities, which in turn helps provide the skilled labor the industry needs. Through the program, college graduates enroll in a teaching program to provide a higher standard of education for junior and high-school students in rural areas. “This way companies are much more likely to remain in our parks instead of moving to areas where they may be unable to acquire the professionals they will need,” Barreiro says.

This year, the company is starting operations in three parks in Queretaro, one in Guadalajara, one in Irapuato and consolidation of its park in Puerto Interior next to the Bajio Airport. Its new park in Celaya, Guanajuato called Celaya III, should have functional units by 3Q16. Advance is also looking to expand to Puebla and San Luis Potosi. “While other states north of the country like Chihuahua, Sonora and Baja California are expanding rapidly, we are more interested in the center of Mexico, as the market in the region is highly homogeneous and we have many distinctive advantages that we would not yet enjoy in the north,” Barreiro says. “In our view there is plenty of capital today from the Mexican Pension Fund System but there is a lack of institutional developers in central Mexico.” 

The company’s new industrial park next to Queretaro International Airport will start operations by the third quarter of the year and will eventually incorporate up to 150,000m2 of industrial buildings for clients in many sectors but mainly for the aerospace and automotive industries. “We acquired the land two years ago, and began to commercialize it last year as companies in the aerospace and automotive sectors often need one or two years to make these decisions,” Barreiro says. “We will begin occupying spaces this summer and we expect to have the park fully consolidated within the next five years.”

A challenge for many companies across all infrastructure segments is land availability. Barreiro believes it is hard to find lots with services and permits and even harder to find land at decent prices with a market as active as it is now. “Our list of international clients and state-of-the-art fully operational parks focused on automotive, aerospace, logistics, food and technology industries has helped us to convince land owners to sell and to provide evidence to local authorities that these long-term investments help the development of the local economy by drawing in companies that generate employment and pay taxes,” he explains.