Nearshoring boosts Mexico’s industrial activities, including mergers & acquisitions

The increase in demand for industrial spaces in Mexico in recent years as a result of nearshoring has not only led to the diversification of regions where the effects of this practice are being observed, as evident in the report "Nearshoring in Mexico: Demand in the Industrial Real Estate Market (Year-end 2022/Q1 2023)" by consulting firm CBRE. It has also had a significant impact on various sectors of production.

CBRE highlights that 2022 was a breakout year, as the total demand for industrial areas in Mexico doubled to 16.5 million square feet compared to 733,000 square feet in 2021. Furthermore, it indicates that Guadalajara, outside of northern Mexico, has the highest nearshoring activity, with 829,000 square feet occupied and 47% dedicated to activities related to this trend.

Mergers and acquisitions as a part of the nearshoring formula

Sectors such as manufacturing, technology industry, design, transportation, logistics, distribution, and other B2B services have seen an increase in their activities due to nearshoring, as reported by EGADE in their quarterly mergers and acquisitions report.

According to data from the institution, companies including Bimbo (food), Holcim and Cemex (construction raw materials), Bombardier (aerospace industry), and Plerk (financial services provider), among others, have opted to apply these practices to avoid the complexity of starting activities in territories outside their original area of operation.

Benefits for regions with operational advantages

The effect of nearshoring drives both national and regional economies. However, the resulting change, thanks to benefits in terms of production costs, transportation, and cargo volumes (considering that shipping items from China is limited to the requirements of 40-foot shipping containers), brings improvements in job creation figures, new companies, and the relocation of foreign companies bringing their activities to the country.

From Mexico, manufacturing companies can make same-day or next-day deliveries to the US market, reduce decision-making time due to a maximum 3-hour time difference, and lower operational costs due to existing free trade agreements.

These factors, as indicated in the EGADE report, are causing a shift from “Made in China” to “Made in Mexico” since the COVID-19 pandemic, even for Asian companies betting on expanding their operations in a good framework.

Consolidation of southern regions, a 10-years challenge

In the context of increasing industrial activities, southern areas of Mexico are still working to develop infrastructure and conditions that attract foreign enterprises. This challenge will take around 10 years, according to information published by “El Economista”. The newspaper indicates only 1% of the total industrial spaces in Mexico are in this area.

Boosting all the regions to take advantage of the benefits Mexico offers for attracting foreign investments and activities would improve the industrial activities and, therefore, the economy in lagging areas of the nation. In Frontier Industrial, we aim to offer industrial land for sale and industrial buildings for lease in the main industrial areas to improve these situations in Mexico.