Baja California Faces Industrial Plant Shortage
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Baja California Faces Industrial Plant Shortage

Photo by:   Johannes Plenio, Pexels
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Pamela Benítez By Pamela Benítez | Junior Journalist & Industry Analyst - Wed, 12/22/2021 - 13:12

Baja California reports less than 1 percent available industrial plants amid a global container crisis and nearshoring trends, leading experts to fear a decrease in foreign investment. The situation could also bring opportunities for construction companies.

The coastal state has between 20 to 30 available industrial plants but the Manufacturing and Export Industry Association (Index Coastal Zone) claims that these do not fulfill the necessities of the companies that seek to invest in the region. A new industrial plant could take up to two years to be built, unless its developer owns the necessary infrastructure to fasten the process, said the president of the Industrial Association Otay Mesa (AIMO). 

The lack of available plants could reduce investment opportunities but it has created room for growth for industrial real estate developers, which could lease for longer terms with better prices while experiencing a faster cost recovery, according to Pedro Montejo, President, Index Coastal Zone.

“For instance, rent is currently at MX$0.50 (US$0.024) per ft2 in Tijuana and with this high demand it could climb to over MX$0.60 (US$0.029) per ft2. Contracts that used to be for five or 10 years, now range between 15 and 20 years,” said Montejo.

To support the industry, the Ministry of Urban Development and Environment has committed to deliver construction permits in a seven-day waiting period, as developing companies need governmental support to accelerate bureaucratic processes and benefit from the current situation. 

This situation arises amid a global container crisis. The lack of containers has raised export costs to Asia, the largest container producer worldwide, causing a bottleneck in commercial maritime routes and decreasing activity in key international trade ports. The problem also affected Mexico’s Black Friday sales and could impact holiday retail by reducing the amount and variety of products on store shelves. 

Solutions did not take long to emerge and while companies such as Costco and Walmart saw profit in chartering ships, others such as Little Tikes Cozy Coupes and Keeson Technology Corp., have preferred nearshoring in northern Mexico. The country has strongly benefited from nearshoring due to the country’s geographic location, cheap labor, plenty of land and proximity to the border, as reported MBN. 

While Mexico could continue to benefit from this growing trend, it needs quick and effective solutions to address challenges such as the industrial plants shortage in Baja California.

Photo by:   Johannes Plenio, Pexels

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