Industrial parks are experiencing a historic moment in Mexico. In the last four years they have experienced unprecedented growth. In 2019, prior to the pandemic, net absorption (millions of square meters (m2) occupied) was 2 million m2; by 2023 that figure reached 5 million m2.
This success is not fortuitous, as nearshoring, the pandemic and the trade conflict between China and the United States have accelerated this growth. However, challenges such as energy, water, security, bureaucracy and not maintaining the conditions for Mexico to maintain dynamism could put a stop to this opportunity.
Mexico’s industrial success
The key to the success of industrial parks has two main ingredients: the pandemic and the trade war between the United States and China, which has resulted in many companies reconsidering new locations for supply chains, closer to the North American market.
“Mexico benefits from its geographic location and emerges as an important destination for nearshoring, which is a driver of Foreign Direct Investment (FDI). This market dynamism caused developers of industrial parks, investment funds, and fibers to invest,” says Claudia Esteves Cano, general director of the Mexican Association of Private Industrial Parks (AMPIP).
During the first half of 2024, FDI broke a record, reaching 31.1 billion dollars, according to figures from the Ministry of Economy, which represented a growth of 7.2% compared to the same period last year, being the highest figure on record for the same period. Among the destinations of FDI, the largest share is in manufacturing (54%).
On the other hand, Carlos Zegarra, leading partner of Management Consulting at PwC Mexico, explains that this boom has brought an upward trend in the size of industrial parks.
“There is a demand that triples or quadruples the average sizes of square meter requirements that there were, that is, they are more extensive production processes, with higher levels of complexity, which require larger spaces, which is a positive trend,” says Zegarra.
Most of the industrial parks are located in entities such as Nuevo León, Baja California, State of Mexico, Chihuahua and Guanajuato, to mention the five main ones.
While the pandemic exposed the vulnerabilities of the supply chain, which accelerated the need to diversify and move from a globalization of production to a regionalization. “The pandemic left many things in evidence that made a change in the market,” says Esteves.
This led to rapid occupancy, explains Francisco Muñoz, executive vice president at CBRE, and triggered a historic growth in the construction of industrial parks. In 2019, 15 parks were registered under construction, by 2024 it was 72. “We had never had such enormous growth,” confirms Esteves.
Currently, of the 460 industrial parks, that is, of the 80 million m2, there is an availability of 2.2%, which means that almost 98% are occupied.
Energy: the greatest challenge
Industrial parks face challenges such as security, water, bureaucracy and energy, which is the most worrying.
“The greatest need that companies that set up in the country have is to be able to have a permanent and efficient energy supply. Not having surprises along the way (such as) power cuts or energy that does not have the required quality,” says Carlos Zegarra.
Currently, the Electricity Industry Law (LIE) only allows a maximum distributed generation capacity of 0.5 MW, so the AMPIP asks that it be reconsidered to 1.0 MW and thus allow self-consumption in industrial parks.
“The current limit is highly insufficient for the typical needs of a manufacturing company and does not allow for the use of the solar potential available on the site,” explains Oliver Probst, professor, researcher and national director of the Master of Science in Engineering at the Tecnológico de Monterrey.
In 2023, the operation of industrial parks had an approximate demand of 13,000 MW and, according to AMPIP, it estimates that for the period from 2024 to 2029, it is expected to develop just over 20 million m2 of real estate space in 128 industrial parks that will require an additional 3,000 MW.
Zegarra adds that the companies that establish themselves in the park have decarbonization goals to meet. “(Many) are multinationals and have different stakeholders who increasingly demand compliance in ESG issues,” he says.
AMPIP mentions that having electricity produced from fossil fuels today does not inhibit the arrival of companies and investments, but it could in the future. “The problem is that some can go to Central America or other markets that may not be as strategic, but where they can get a little more energy, that is the great challenge,” says Muñoz.
Regarding the appointment of Emilia Esther Calleja Alor, as head of the CFE for the government of Claudia Sheinbaum, Muñoz sees it as something positive, because he assures that she is “a very capable woman who has worked on the electrical issue during her last years and specifically in the logistics of electrical energy, which is what we need.”
Another issue that concerns the industry is the regulatory environment, as Esteves says that there are procedures at the federal, state and municipal levels, which are doubled or tripled. “Many years ago, it took a year to build an industrial park, now it takes two, and that is because of the procedures, so the speed of these can help a lot to make investments even more productive.”
In the background are security and water. Esteves divides the issue of security into two aspects: that which occurs within the parks, which, he assures, is reliable and allows companies to operate in a calm manner. While outside the parks they have detected problems on the roads that affect transportation and the operation of companies. “We can do little about that security, it is a job that is in the hands of federal, state, and even municipal governments,” he comments.
Regarding the issue of water, he affirms that they do not have companies with intensive use. “All industrial parks have treatment plants, they seek to recycle it for proper management,” he says.
A stable future
The economic cycle that Mexico is experiencing could cause the number of industrial parks to reach 128 or 130 by 2029 and to stabilize in three years. “We do not need to flood the market with industrial buildings, especially because no one serious builds a park if there is no demand,” she says.
For Elizabeth González, fixed asset valuation manager at KPMG Mexico, the incoming government has excellent opportunities, new and ongoing, to implement good initiatives in development, investment, transportation infrastructure, and energy, which will allow the interest of FDI to be maintained, especially in the industrial field, which is why AMPIP is open to dialogue with the new administration.
However, Carlos Zegarra assures that to continue obtaining benefits from nearshoring, Mexico must be more proactive. “It is thought that due to our geographic location and because we have the T-MEC, we are already ready. We have to be much more proactive and aware that we are the only country in this game and the one that plays best in the long term is the one that will have the largest size. We are going to take a bigger slice of the pie with comprehensive, medium and long-term policies.”
Claudia Esteves says that from the AMPIP they will ensure that the boom occurs very carefully and avoid a disorderly development. “It is a very healthy and very resilient sector.”
Source: forbes
