In the past twelve months Cd. Juarez has continued to be one of the most active real estate markets in Mexico. For 2007 Global Insight has estimated that the total Maquiladora industry will export $125 billion dollars worth of goods, with approximately $24 billion (20%) being generated in Cd. Juarez. This growth is being fueled by infrastructure investment across the city. New housing developments, expansion of utility services, the greatly improved transportation network and the continued development of industrial land are providing the foundation for future growth. With this foundation Cd. Juarez’s industrial growth will continue to set the region apart from other North American manufacturing markets for years to come.
This effort was recognized earlier in 2007 by fDi Magazine, which ranked Cd. Juarez as the #1 large city of the future. fDi Magazine is an international publication focused on information related to foreign direct investment. Every two years it publishes results from an extensive study of cities across North America using data and qualitive information modeled on potential investor’s screening process to determine locations suitable for capital investment project. The study considered information related to economic potential, cost effectiveness, human resources, quality of life, infrastructure, business friendliness and foreign direct investment promotional strategy. The report states that “although Juarez is only the eight largest cities in Mexico, fDi’s judges noted its growing importance as a regional industrial and logistic centre on the border between Mexico and the U.S.”
Cd. Juarez saw 5,420,000 SF of total activity (leases, sales, and renewals) in 2007. This industrial activity resulted in almost 1,100,000 SF of net absorption. Overall market vacancy trended downward, ending the year at 6.4% of the 53,820,000 SF of total industrial supply in Cd. Juarez for buildings over 30,000 SF. This is a slight increase from the end of the third quarter due to significance new speculative constructive during the 4th quarter, all taking place in the southern half of the city.
Overall construction in 2007 was slightly under 2,200,000 SF, finally putting Cd. Juarez’s industrial base above that of El Paso. This is an important statistic because it highlights the focus on real estate in Mexico and confirms the trend of companies looking to place component parts inventories on the Mexican side close to their customers and also taking advantage of new customs programs that make finished product warehousing more costs effective for some operations.
The key transactions for 2007 are highlighted on the next page. The largest deal in Cd. Juarez in 2007 was also the newest. Wels pun, an Indian textile firm, entered the market with a lease of 630,000 SF. Enlight (electronics) also leased a new SF facility from Intermex, Jarsa (3PL) occupied 180,000 SF from Prologis, Toshiba (electronics/warehouse) leased 125,000 SF from American Industries and Visteon (automotive) started new operation in 180,000 SF recently constructed by Verde.
Key building sales includes Morse Automotive’s purchase of two Philips plants in the Juarez Park, Prologis’s acquisition of two BRP plants in the Bermudez Park and Verde’s purchase of the TTE warehouse on Henequen and Las Torres, now occupied by Welspun. There were also two significant portfolio sales in 2007. Interamerica purchased Intermex’s Mexico industrial portfolio which included approximately 3,000,000 SF in Cd. Juarez. Vesta also purchased the Los Bravos industrial portfolio, compromised of approximately 275,000 SF along Ave. de las Torres. The Los Bravos portfolio included additional industrial and commercial land for future growth. This is Vesta’s first foray into Cd. Juarez but they are major developer throughout Mexico and this purchase brings another strong developer into the market.
We expect total activity in 2008 to slow slightly as the market returns to historical norms for vacancy and absorption. New construction should help keep vacancy rates near 6.0% but we do not expect rental rates to drop any lower than they are at this time. Instead, rental rates should stabilize at $5.00 PSF for Class A product and $4.50 PSF for Class B product. Companies looking for larger buildings over 150,000 SF will have the most difficulty, as most of the new spec construction is below 100,000 SF.
Source: CB Richard Ellis, 2007 Market Summary.