Mexico Industrial Real Estate: Vacancies Drift, With Supply Re-Expanding. A Trough Could Be Near

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Mexico Industrial Real Estate: Vacancies Drift, With Supply Re-Expanding. A Trough Could Be Near

+ Toluca concentration, while names with outsized northern border

exposure carry the most risk; the ~25% gap between market and reported rents

should continue to support modest rent growth even as headline asking prices

plateau. Overall, with supply at historic low levels and with demand

potentially starting to improve soon, although the pace of recovery could be

slow, we believe that we are close to the bottom and further deterioration will

be limited.

• What is next? We continue to see further deterioration ahead, as supply has

risen, with the national pipeline rising to 3.0% of inventory from 2.3% in 1Q,

with GLA under construction climbing to 2.6mn m² (+0.6 mn m² q/q). The

Northern region rose to 852k m² from 662k m², with Monterrey the greatest

riser at 520k m². With absorption still running at around ~700k m² per quarter

against starts of ~800k m², we expect national vacancy to drift towards 7.3%

by year-end from 6.8% in 2Q, unless we see changes in demand trends which

could happen as companies seem to start making investment decisions,

understanding Mexico’s advantages despite trade uncertainties. Markets with

the largest overhang remain Tijuana with vacancy at 18.1% and Monterrey

with >150k m² of monitored subleases, which will take the longest to

rebalance, while tighter markets like Aguascalientes (1.9%) and Guanajuato

(2.7%) should hold up better. Asking rents should stay roughly flat

sequentially, with border markets skewed slightly lower. We believe

companies within our coverage will remain resilient, particularly FPL, given

its robust portfolio and high-quality tenants. On greenfields, both Vesta and