2021 Investing in Mexico

Contributors

David Buck
Executive Managing Director, Global Head of Logistics

Lange Allen
Managing Director, U.S. Industrial/Logistics Development

Will McIntosh, Ph.D
Global Head of Research

Jay Johnston
Senior Associate, Research

Mark Fitzgerald, CFA, CAIA
Executive Director, Research

October 2021

Executive Summary

This paper will focus on Mexico’s industrial sector opportunity while providing a historical overview of the U.S./Mexico economic partnership, describing the country’s real estate demand drivers, and highlighting potential investor risks.

  1. Global real estate investors have increased their focus on Mexico in recent years. Capital flows during the latest cycle have exceeded prior peaks, driven largely by heightened interest from foreign operators and investors looking to reshore production and shorten supply chains.
  2. Mexico’s maturing demand drivers (e.g., a diversified economy, favorable demographics, expanding middle class, and prospects of reshoring in North America) warrant this increased interest from institutional capital.
  3. Mexico’s institutional quality real estate market is still in a relatively early stage. To take but one example, Fibras (or Mexican REITs) only began to emerge in 2011. The industrial sector is one of the country’s more sophisticated property sectors, though; due largely to Mexico’s long standing as a cross-border manufacturing hub. Strong warehouse demand, coupled with limited supply, suggests the market has plenty of growth potential.
  4. While such longstanding risks as corruption and currency volatility still exist, the country’s trade relationship with the U.S. has gained added clarity after the signing of the U.S.-Mexico-Canada Agreement (USMCA) in late 2018 (which took effect on July 1, 2020).