By Christian Canales, Public Relations and Communications Manager, JLL Mexico
While industrial warehouses don´t have the glamour associated with a prime office tower or a five-star hotel, they play a fundamental role in a company´s logistics – and are the backbone of a country´s economy.
Foreign companies continue to be attracted to the Mexico real estate market, specifically in the Bajio region (which includes Queretaro, Guanajuato, Aguascalientes, San Luis Potosi, and Guadalajara). This region – particularly attractive to the automotive, aerospace, and food industries – continues to create new industrial parks and buildings. Rents shown in Jones Lang LaSalle's (JLL's) Mexico´s latest report Mexico Industrial Report Q2 2015 for industrial properties located in this area are on average at 3.81 dollars per square meter per month. The 13 percent rate decrease from 4.39 dollars (at the end of 2014) reflects stock in lower priced industrial parks added to this report.
“Warehouse construction costs are the same in the whole country, but this has to do with the price of the land,” said Gerardo Ramirez Barba, National Director of JLL´s Corporate Industrial Solutions based in Mexico City. “In the Bajio lease prices are found to be lower than in other regions of the country.”
Recently, Honda opened their new transmission plant in Celaya, Guanajuato. During Honda Mexico's Transmission Plant inauguration, Ildefonso Guajardo Villarreal (Mexico´s Secretary of Economy) highlighted that Honda's vision is aligned with major transformations in global integration, such as the North America Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership Agreement (TPP). This places Mexico as a vital link in the global supply chain.
Data from the Mexican Association of Automotive Industry reinforces this point. In 2015, production, exports and national sales have broken records – showing a 20 percent increase from 2014 – and surpassing results in 2007 (a year that was considered the best ever for the auto sector).
Alberto León Santacruz, Director at JLL Mexico´s Corporate Industrial Solutions, explains that the presence of companies like Honda in the Bajio area is not a coincidence. “There is a good electrical infrastructure, water supply, transportation systems (like railroads and highways), and the area is relatively close to ports,” advised León Santacruz. “Additionally, the region has a well-educated, young population, which is a leading site selection factor for new companies.”
In general, the first quarter of 2015 was favorable for the country´s industrial markets. According to JLL´s Mexico Industrial Report Q2 2015, industrial stock grew substantially as new construction delivered.
With the arrival of large ecommerce retailers like Amazon and H&M, companies must consider industrial warehouse space to fulfill consumer needs. Experts in JLL´s Industrial research group see the warehouse market expanding at roughly 12–15 percent through 2017.
“Growth opportunity can be found in more than one sub market,” continued Ramirez Barba. “Strategic industrial locations are distributed across the country offering a variety of tailor-made possibilities for new businesses.”
As more businesses continue to grow and expand online operations, an increase in logistic warehouses will become a reality. According to JLL Industrial´s report “Urban logistics: the cost/service trade-offs associated with servicing the last mile,” Boston Consulting Group expects the global online grocery market to increase from $36 billion in 2013 to $100 billion by 2018.
In December 2012, Mexico began negotiations to form part of the TPP, a commercial trade agreement referred to many as the modern day NAFTA, boosting trade with countries located in the Asia-Pacific and the Western hemispheres. In October 2015, Mexico concluded negotiations in the TPP which has potentially propelled the country´s industrial segment to a whole new level.
“The outcome of the negotiation was made possible due to the political will, the pragmatism and the flexibility of each of the parties involved in the negotiation,” said Guajardo Villarreal. “The TPP strengthens the integration of productive chains of Mexico, USA and Canada, contributing to the goal of turning North America into the most competitive region in the world.”
According to the Secretary of Economy, eleven countries that are also part of the TPP account for 72 percent of the foreign trade of Mexico and are the source of 55 percent of the investment received by the country since 1999.
“Many foreign investors see this [industrial] market in Mexico as a great opportunity,” commented Pedro Azcué, CEO of JLL México and Chairman of Latin America. “Our proximity to one of the most important economies in the world places Mexico in a strategic advantage against others – allowing this to be an important decision factor to consider for companies installing operations in the country.”
While construction of new trendy office towers continue to build the city skyline, industrial warehouses continue to play a key role in a company´s logistics with their functional design and out of town locations. As far as industrial warehouse demand, one thing is certain; Mexico offers a vast variety of options for those in search of smart and efficient industrial space.
About the Author
Christian Canales has been working in the corporate real estate industry for the past couple of years, with particular focus on the office, industrial, and hotel and hospitality sectors. Currently, Canales is the Public Relations and Communications Manager for JLL Mexico, a global professional real estate firm previously known as Jones Lang LaSalle, which is based in Mexico City. Prior to working for JLL Mexico, she attended the Instituto Tecnológico y de Estudios Superiores de Monterrey, Campus Monterrey receiving a Bachelor´s Degree in Communication Studies and continued her education specializing in Marketing and Public Relations at New York University while working in the retail industry in New York, NY.