The Year in Infrastructure: Presidential Transitions, Nearshoring

Infrastructure developments were shaken up on several fronts in 2024. López Obrador’s administration came to an end in 2024, bringing the completion of flagship projects. The nearshoring trend lost momentum amid rising tensions with the United States, Mexico’s main trade partner, impacted the industrial real estate sector. The public and private sectors see room to continue capitalizing on nearshoring, though experts emphasize the need for collaboration.

During former President López Obrador’s administration, the private sector’s participation in Mexico’s infrastructure projects fell by 14.3 percentage points, from 68.3% in June 2018 to 58.5% in June 2024. According to Luis Méndez, President, CMIC, this was due to López Obrador’s major infrastructure projects, which have absorbed over 20% of public investment in infrastructure, and the increasing participation of the armed forces in these projects.

During her inauguration, President Claudia Sheinbaum proposed new projects and promised continuity in other initiatives. Among her objectives are the construction of 1 million homes in partnership with institutions like INFONAVIT and FOVISSSTE, repairing 4,000km of federal highways, expanding key ports and airports, and creating 100 new industrial parks and 10 industrial corridors. She also outlined plans for rail expansions, including 3,000km of new lines, and committed to extending internet access nationwide while enhancing cross-border infrastructure with the United States.

Regarding the 2025 Economic Package, Sheinbaum’s administration has been subject to criticism as it reduces resources for key areas, including a 5% cut in transportation investment (MX$10 billion less than 2024), a 43% reduction in road infrastructure spending (MX$27 billion), a 58% reduction in water projects, and a 9% reduction in hospital infrastructure. However, México Evalúa highlights a positive shift, as SICT will resume a central role in public works development, replacing the armed forces.

Donald Trump and the Nearshoring Flattening 

Over the past years, the industrial real estate sector had been experiencing more dynamism, with industrial space availability reaching less than 1% in 2023 due to nearshoring, according to MBN’s 2023 Infrastructure recap. However, industry insiders noted that 2024 was marked by more cautious investor behavior, as entrepreneurs awaited the outcomes of the Mexican and US elections. This uncertainty was heightened by the eventual election of Donald Trump as the 47th President of the United States.

The main threats include larger tariffs, as Trump says he would impose a 25% tariff on Mexican and Canadian imports as of Jan. 20, 2025. While institutions like MONEX forecast high occupancy rates in the industrial segment, some companies like Mazda are reevaluating their investment plans in Mexico. The potential tariffs, along with global economic uncertainties, have led Mazda to develop a "Plan B," which could involve scaling back investments, shifting focus to R&D, or relocating production to other countries. “From January onward, much will depend on how tariffs and other key trade issues are handled, as they could directly impact the footprint of companies assembling and exporting to the United States,” says Carlos Quezada, CEO, Stellantis Mexico.

As of 3Q24, Mexico’s central, northwest, and northeast regions saw significant drops in construction and absorption of industrial space, with decreases ranging from 29% to 58%. In contrast, the Bajio region, particularly Queretaro and Guanajuato, reported positive growth, with a 3% increase in construction and a 33% rise in absorption, driven by sectors like storage, automotive, and electronics.  Despite these declines, total construction launches from January to September 2024 reached 4.1 million m², a 4% increase from the previous year, and gross absorption hit 4.3 million m², reflecting a 1% year-on-year growth, according to information from Datoz. 

According to AMPIP’s data, as of 3Q24, net absorption stood at 3.1 million m², with a vacancy rate of 3.5%, while in 2023 the sector closed with 5 million m² of absorption and 2.2% of availability. 

With the revision of the USMCA and a more intense trade war between the United States and China on the horizon, industrial space demand from Chinese companies dropped by 6.4% in 3Q24. "The uncertainty caused by the trade war between the United States and China and the threats regarding tariffs, will be crucial moments for Mexico,” said Jorge Ávalos, President, FIBRA Monterrey. 

Industry Perspectives

CitiBanamex attributes the 2024 slowdown in the construction sector to a high base of comparison from 2023, tempered enthusiasm for nearshoring, stricter post-election public spending in Mexico, and political uncertainty affecting investment.

The bank estimates a 7% contraction in the construction sector in 2025, mainly due to public spending cuts, particularly in physical infrastructure, and political instability. Additionally, external political uncertainty, compounded by potential tariffs and policies from Trump’s administration, is expected to dampen investment confidence. “These perspectives for the construction sector could improve if measures are taken to restore companies' investment confidence, if synergy is generated between the public and private sectors for infrastructure development, if a constructive relationship with the United States is established to fully capitalize on reshoring trends, and if an effective and efficient housing construction policy is implemented,” says CitiBanamex. 

The industrial real estate sector remains optimistic. There is still an opportunity for this segment, as industrial space demand from the automotive, logistics, and, if developed, semiconductor sectors could increase. AMPIP plans to construct 17 new industrial parks spanning 1.76 million m² for 2025. These parks will impact the AIFA, Bajio, Maya, Pacific, North, and Northeast corridors. Furthermore, BBVA’s Second AIMPI Survey estimates the arrival of 198 new tenants in 2025.