The global trend of nearshoring, the supply of labor, its strategic location and trade agreements (Free Trade Agreement with the United States and Canada) place Mexico as an important pole of global industrial development.

It closes an atypical year that generated a global change that affected the way we develop economically and socially, where governments took the necessary measures to preserve lives, but to the detriment of productivity that brought a slowdown in consumption and the investment.

The technological change that had been advancing was installed in an accelerated manner in almost all economic activities, favoring contact between people at minimum levels and thereby controlling the spread of COVID-19. The activity of consumption of goods and services and how the process is optimized, from purchase to delivery, mobilized the industrial real estate market, where an increase in sales can be done through electronic commerce, which generated that companies of these sectors , some retailers and semi-durable consumer goods, will begin a process of expansion of their logistics centers to meet the demand that has increased.

Image 1: Industrial demand volumes by market (m²), at the end of the fourth quarter of 2020.

At the beginning of the pandemic, manufacturing was affected by the collapse of global production lines due to the suspension of operational activities of manufacturing companies, which led to rethinking the current model of the last 20 years, known as offshoring, emerging the need to have the closest supplier to the final assembly center, that is, to establish nearshoring. This situation created a window of opportunity for Mexico as, given its location, workforce and the recent Trade Agreement between Mexico, the United States and Canada (T-MEC), the most viable option for the arrival of companies established in Asian countries that supply two large North American markets: the United States and Canada. Mainly the northern cities took advantage by demonstrating their capacity to receive large companies and how strong the market is even in adverse times.

Industrial demand both in Mexico City, Monterrey, Guadalajara and Tijuana far exceeded that reported in the same period of the previous year. Gross demand in the metropolitan area of Mexico City was 260 thousand m² in the last quarter of 2020. The main sectors that contributed to this figure were electronic commerce and logistics companies, essential services for the supply chains to be strengthened and detect new strategies to improve their operability. Monterrey closed the fourth quarter of 2020 with a gross demand of 195 thousand m², which translates into an upward trend of 58% compared to the same period last year, driven by companies in the logistics, retail, automotive sector and, mainly , the manufacturer. Guadalajara concluded with a gross demand of 90 thousand m² for the same period of analysis, thus reporting one of the best levels in recent years. Companies in the logistics, tobacco, storage and medical sectors were the promoters of this indicator, observing a market with little vacancy and incorporation of made-to-measure spaces that entered occupied inventory. Tijuana gradually recovered demand during the last three quarters, with an annual growth of 43%. At the end of 4Q 2020, the arrival of companies from the logistics sector, the medical, food, metalworking industries, and a significant reactivation of the manufacturing sector was reported. Another market that continues to report good demand numbers is Ciudad Juárez, Chihuahua, which at the end of the quarter culminated with a total of 43 thousand m², being companies of money, logistics, automotive and manufacturing concentrated the demand of this city.

Image 2: Industrial vacancy volumes by market (m²), at the end of the fourth quarter of 2020.

On the other hand, the markets of the Bajío region show a decrease in demand, due to the fall in the demand for durable and semi-durable goods, money order companies that commonly occupy space in this region. Markets such as Querétaro and Guanajuato, traditionally the most dynamic in the region, continue to record demand volumes that are much lower than those registered in prepandemic periods, and very far from those reported four or five years ago. If we analyze the amounts of demand in these markets, during the fourth quarter of 2020, Querétaro barely registered 5 thousand m², Guanajuato 67 thousand m², San Luis Potosí almost 25 thousand m², while Aguascalientes did not report demand for class A space during this period.

Vacancy continues to maintain healthy levels in all markets, with the highest vacancy rate being that of the state of Guanajuato, which closes the fourth quarter of 2020 with a rate of 8.6%, however, at the national level the rate is 4.6%. Cities such as Guadalajara, Tecate, Saltillo and Mexicali close the gap reporting significant downward adjustments, on the other hand, the metropolitan area of Mexico City, Puebla and Querétaro have vacancy rates that are 30% higher than those reported in the same period from last year. Tijuana and Monterrey register behaviors close to the same period of the previous year.

Image 3: Industrial average rental price by market (USD / m² / month), at the end of the fourth quarter of 2020.

Industrial rental prices have been impacted by two important issues, the first is the pressure generated by the scarce availability of vacant spaces, as is the case in Guadalajara and Tijuana where prices have annual increases of 5 and 10%, and Another factor is the appreciation of the Mexican peso against the dollar. The two most important markets in the country, in terms of inventory volume, the metropolitan area of Mexico City and Monterrey, closed 2020 with prices very similar to the same period of the previous year. Few markets have a decrease in rental prices, among which stand out is Queretaro with an annual decrease of 3.5% and San Luis Potosí with 2.9%.

Image 4: Industrial construction volumes by market (m²), at the end of the fourth quarter of 2020.

The industrial real estate segment has been one of the most resilient to the onslaught of the pandemic. The behavior of the demand, vacancy and price indicators has allowed the developer to start projects that were in the planning stage and some new ones. Although during the quarter construction activity remained at the same levels as last quarter, the annual comparison reports an increase of 25% in meters under construction. If we evaluate the capital construction activity in the metropolitan area of Mexico City, during the last quarter of the year it reported almost 150 thousand m² that began construction, indicative that developers continue to expand their inventories with the adjustments coming from the demand, betting mainly, for the north zone and those close to the city center. Tepotzotlán and Tultitlán were the most active and future developments are expected in this region. In the medium term, the development of new projects is seen in the corridors to the north of the metropolitan area where there is still land and can house industrial complexes, triggering infrastructure and investment.

Monterrey, the second largest industrial city in the nation, delivered at the end of the fourth quarter of 2020 about 177 thousand m² from 11 new projects where just under half is pre-leased. Meanwhile, 13 projects began construction, 8 of them speculative and 5 tailor-made, signaling a gradual recovery, quarter by quarter, compared to the decline in early 2020 due to the pandemic. However, in Tijuana, construction reflected a downward trend, while in Guadalajara the trend is the opposite, registering more than 120% increase over the previous year, visualizing that this trend will continue in view of the downward adjustment in availability.

In general terms, the sector demonstrated throughout 2020 its institutional strength, the maturity of investors who have had the opportunity, through this crisis, to strengthen the position of their portfolios, making timely decisions to divest, and start of new investments that adjust to your business objectives, thus providing a stronger financial profile to your companies in the long term. These investment movements created opportunities for local groups to strengthen themselves in their places of origin and to venture into other nearby territories based on the information, so 2021 is anticipated with investors who will have the ability to strengthen the market, providing a range of sizes, types and conditions that will keep up with the demand, and thereby guarantee stable prices and healthy vacancies.