The relocation of companies to Mexico led industrial park rental prices to soar as much as 35% in cities with a heavy presence of manufacturing, according to a new report by asset manager Franklin Templeton.
(Bloomberg) — The relocation of companies to Mexico led industrial park rental prices to soar as much as 35% in cities with a heavy presence of manufacturing, according to a new report by asset manager Franklin Templeton.
The growing phenomenon of nearshoring, a term used to describe the relocation of international companies to North America to be closer to their US customers, is leading prices to spike across the country, in cities ranging from Guadalajara in the center to border town Ciudad Juarez, Franklin Templeton’s co-head of investment in Mexico Ramse Gutierrez wrote in a report. On average, major Mexican cities saw an increase of 21% in rental prices per square meter in 2022, compared to the year before.
Mexico is luring companies like Elon Musk’s car-making giant Tesla Inc due to benefits including its relatively low costs and proximity to the US. The investments could have major long-term impacts on the economy, according to the note.
“The geopolitical advantage that Mexico has right now is due to its 3,100 kilometers of border with the United States,” Gutierrez said in an interview. “When companies like Tesla, or BMW, or others make industry announcements here, they’re talking about investments that they have planned for 10 to 20 years, which is the useful life an industrial park has for them.”
Read more: Mexico Industrial Park Occupancy Hits Record on Nearshoring Boom
The report, based on data from Mexico’s Finance Ministry citing Newmark Group Inc., shows that vacancies fell 1.6% even while construction grew 66.8%. The study is based on Tijuana, a major hub for the electronics and aerospace industries; Monterrey, a new site for Tesla; Ciudad Juarez, on the border with Texas; and Guadalajara.
Tijuana was the most expensive city, with each square meter costing $7.22 per month last year, up from $5.84 in 2021. Monterrey had the biggest increase in construction, jumping from 488,000 square meters in 2021 to 842,000 in 2022. Its vacancy rate fell in percentage terms more than that of the other cities, to 1.4% from 6% the year prior, the data show.
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