The forces that dominate the real estate market seek for the price to reflect the balance between supply and demand, and the industrial market does not escape this equation.

The shortage in supply translates into increases in rental prices, since the few options that are offered have many applicants who will compete for them and they do so through price.

At the end of the first quarter of 2022, the northern border has managed to accumulate 54% of the national gross demand, where only Monterrey concentrated 25% of the gross absorption in Mexico, registering 463 thousand square meters. Ciudad Juárez and Tijuana ranked fifth and sixth nationally with 172 and 130 thousand square meters, respectively.

If we analyze the evolution of rental prices in industrial markets, all markets raised their rental prices at the national level. Towards the north of the country, Tijuana and Ciudad Juárez are at the forefront with an annual adjustment of 23% and 16%, closing with rental prices of $5.40 and $6.00 dollars per square meter per month at the end of 1Q 2022.

Tecate and Mexicali also show an increase of 15% and 14%, respectively, with rental prices of $5.30 and $4.72 dollars per square meter per month.

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The main factors that come into play are the impact of the growth in demand that has been influenced by the processes of relocation of manufacturing production together with the growth of the logistics sector that increasingly requires more industrial warehouses that are better located and with more incorporated technology. to meet the growing demands of consumers.

The northern location of the country for two years had taken advantage of the signing of the T-MEC and the pandemic created an important window of opportunity for markets near the United States, where vacancies have reached historical lows, as is the case of Tijuana, Ciudad Juárez and Tecate, which registered 0.6% at the end of the first quarter of the year.

Saltillo and Reynosa 3.7% and 3.1%, reaching the lowest levels in the last two years.

We have to take into account that another factor that affects the price increase is the growing inflation in Mexico, which registered 7.45% in March, its highest level for two decades, mainly motivated by the rise in prices of LP gas, gasoline, and basic foods such as corn tortillas that have pushed this indicator up.

In turn, all the construction materials that influence the direct cost of construction of industrial buildings such as cement, steel, aluminum projected an increase at the beginning of the year that will exceed 25%, which will effectively be transmitted in part to the prices of industrial rents.

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These conditions of high inflation and low vacancy with a growing demand are the immediate signal to the market to activate the construction of speculative spaces that have not yet been strongly awakened in various markets in the north of the country. Perhaps the developers had not yet activated their decisions at the beginning of the year, but we project that the second and third quarter construction activity will continue to detonate in these frontier markets.

This has been understood in markets such as Monterrey, Saltillo and Tijuana, which started new industrial buildings during the first quarter of the year for 443, 84 and 78 thousand square meters, respectively.

The remainder of the year anticipates greater construction activity and portfolio movements among the main institutional developers who live on the northern border of the country.