US Tariffs to Slow Mexico Industrial Space Growth: Fitch Ratings

Mexico’s industrial real estate companies are anticipated to face slower investment and growth due to uncertainties stemming from US tariffs, reports Fitch Ratings. The agency notes that recent changes have introduced doubt regarding the nearshoring trend, with issuers heavily exposed to manufacturing likely experiencing the most significant effects. 

Fitch Ratings highlights that the global trade environment created considerable uncertainty, leading the agency to lower its world growth forecasts. For Mexico, Fitch Ratings projects a GDP contraction of 0.4% in 2025 before a recovery of 0.8% in 2026.

Although the specific scale and duration of tariffs and potential retaliatory actions remain uncertain, the existing ambiguity is prompting Mexican real estate companies to reevaluate the timing of their investments and consider alternative strategies as demand moderates.

Issuers with greater exposure to the manufacturing sector are expected to experience a stronger impact. Fitch Ratings estimates that approximately 80% of manufacturing clients serve export markets, primarily the United States, with the automotive industry, identified as vulnerable to tariffs, constituting nearly one-fourth of the gross leasable area (GLA) held by Fitch-rated issuers in this sector.

As of 1Q25, rated issuers maintained a GLA composition of 47% manufacturing and 53% logistics/consumer properties. The northern region of Mexico accounts for a significant portion of this GLA, with 46% of it, and the majority of current development projects with 56%. On the other hand, most of the logistics and consumer-focused GLA is located in the central region and primarily serves the local market.

The established business model within the sector is seen as a factor mitigating some near-term risks. Development activity may increasingly concentrate on built-to-suit projects, where tenants are secured before construction begins. Fitch Ratings also noted that some issuers, such as FIBRA Prologis and Fibra Monterrey (FMTY), prioritize acquiring operating assets over new developments, thereby reducing start-up risk.

According to Fitch Ratings, common contractual features like mandatory fixed-term rental contracts with substantial penalties for early termination are also noted. These contracts are typically linked to inflation and are frequently denominated in US dollars and structured as triple net leases. Fitch Ratings estimates the average lease maturity for the industrial sector to be around four years.

While there is uncertainty around nearshoring, Fitch Ratings adds that the sector's conservative business models, continued healthy occupancy rates, and stable financial profiles are mitigating factors. Operational metrics have remained strong, with average occupancy rates exceeding 95%. Fitch anticipates moderated conditions in the coming months but expects occupancy to be relatively stable. Following significant rent increases on lease renewals in recent years, the agency expects lease spreads to become more modest.

Fitch Ratings anticipates that rated real estate issuers will maintain stable capital structures. Companies could reduce investment spending to help preserve occupancy rates in response to weaker demand. 

Fitch Ratings points to Vesta and FMTY as examples of issuers with high leverage headroom. However, the agency notes that FMTY's higher exposure to manufacturing could make it more susceptible to the effects of trade measures. FIBRA Prologis' EBITDA leverage was temporarily elevated at year-end 2024 due to the acquisition of FIBRA Terrafina but is expected to normalize by the end of 2025, remaining below the agency's downgrade trigger.

FIBRA Uno (FUNO) is noted as having lower leverage headroom, though its industrial portfolio is more focused on the logistics and consumer segments serving the internal market, which could help offset potential tariff impacts.