The second quarter of the year ends in the midst of a global economic outlook marked by inflation, where the United States Federal Reserve in mid-June announced the increase in the official interest rate by 75 basis points, this being the largest increase announced in recent years. last 28 years.

The Bank of Mexico followed the same line with the increase of 75 basis points, thus reaching a target interest rate of 7.75%, which is favorable so that local financial assets do not lose attractiveness compared to those of the United States.

Meanwhile, internal inflation at the end of the first half of June exceeded 7.88%, where the increase in electricity becomes one of the factors that could generate the greatest impact on industrial activity, and the increase in food that affects the entire national productive activity.

In turn, the T-MEC, the main trigger for industrial demand, has just turner two years old and has already exceeded 660 million dollars for Mexico with figures at the end of 2021, where sectors such as the automotive and electronics lead the growth opportunity that has strengthened nearshoring.

Let us remember that Foreign Direct Investment (FDI) in Mexico reached 31.6 billion dollars at the end of 2021, which has allowed our country to return to the Top 10, ranking ninth worldwide, led by the United States.

Likewise, in the first quarter of 2022, although FDI exceeded 19.4 billion dollars, which represented 63.7% more than in 1Q 2021, the figure included the merger and restructuring of important companies, which if not contemplated implies an increase in 5.8% of this indicator compared to the same quarter of 2021.

In this economic context, the industrial real estate market in Mexico has maintained the dynamism reported since 2021 with record demand levels, strong inventory increases, falling vacancy rates, upward pressured prices and high construction volumes.

According to the figures provided by the Solili platform, during the second quarter of the year, the gross industrial demand exceeded one million 700 thousand square meters, a figure almost 6% higher than that reported for the same period in 2021. 

If the comparison is made in In the first six months of 2022, the increase is greater, of more than 21%, indicative of the strong historical dynamism that the first quarter of the year represents in the Mexican industrial market.

For its part, net demand managed to rebound by more than 41% compared to the figure registered in the second quarter of 2021, exceeding one million 260 thousand square meters, a clear sign of the marked decrease in vacancies nationwide.

When we analyze the geographical distribution of gross demand, Monterrey ranks first with 430 thousand square meters, followed by Mexico City and Guanajuato, which accumulate during 2Q 2022 the amounts of 287 and 229 thousand square meters, respectively.

The northern border is undoubtedly the main protagonist of the boost in industrial demand, which accumulates 56% of the national total and 40% of net demand. The relocation of the manufacturing production processes have been the main architects of this growth, even in the midst of the strong inflationary pressure that the border markets are experiencing.

The lowland area and the country's capital are other protagonists that manage to concentrate 23% and 16% of the national gross demand at the end of the quarter. There is a notable reactivation in the demand of the lowlands, especially in the markets of Guanajuato and Querétaro, which manage to obtain pre-pandemic figures, however, this demand comes from custom-made projects, with demand still to be recovered in speculative projects.

According to the analysis carried out by Solili, the markets of the lowlands and the north, the demand comes mostly for the development of the manufacturing activity, in which the automotive, electronic, aerospace, medical sectors, among others, stand out, while for the markets in the center and west of the country there is a greater concentration in logistics activities.

Between April and June 2022, the constant in almost all markets has been the strong decrease in vacancy, which has managed to contract by more than two percentage points in the last year, closing at 2.6% nationwide. 

The decreases in vacancy rates in most markets are due to the fact that demand has positioned itself above supply, a trend that we hope will continue for the rest of the year since in some markets, as is the case of Tijuana, Ciudad Juárez, Mexico City, Monterrey and Guadalajara, it has had to resort to pre-leasing, so that once they are incorporated into the inventory, a significant number of projects will enter occupied, while on the other hand vacancy has decreased dramatically in most markets in the country.

The current situation combines vacancies that we could previously consider healthy and are now the highest such as those exhibited by the markets of Guanajuato and San Luis Potosí with 5.9% and 5.3%, respectively. At the other extreme, we see vacancies at historic lows such as Tecate, Tijuana and Ciudad Juárez, which close 2Q 2022 with percentages of 0.3%, 0.7% and 0.8%, respectively.

The rest of the markets move around the national average, as is the case of Monterrey and Mexico City with 2.5% and 2.7%, respectively, although the largest number of vacant meters is concentrated between the two, representing 36% of industrial spaces. available in the country.

The pressure generated by low vacancy rates, coupled with the increase in the cost of construction derived from the inflationary spiral experienced in the world's economies, are affecting the rise in industrial rental prices, practically throughout the country, however, some markets such as Tijuana, Ciudad Juárez and Mexico City recorded the highest annual increases of $1.2, $0.9 and $0.7 dollars per square meter per month, respectively.

Mexico City and Tijuana are currently the markets with the highest prices nationwide, however, markets such as Ciudad Juárez, Reynosa, Guadalajara, Monterrey, Tecate and Mexicali report closing prices for industrial buildings under construction well above their prices. average, that is, we expect higher price increases in these markets in the coming months. 

In contrast, the markets that make up the bajio area maintain prices with a slight upward trend but are the most stable in the country, as a result of the fact that most of the vacant spaces come from pre-pandemic periods, where construction costs are not they were the current ones, so they have decided to maintain the price and thus make it more competitive with respect to other markets in the country.

For its part, construction has been a key indicator to engage the low vacancy rates where with almost 5.2 million square meters of industrial works progress throughout the national territory, which would be representing an amount similar to the entire inventory that today represents Guadalajara.

Monterrey continues in the lead with the construction of more than 1.4 million square meters, which represent 28% of the national total, followed in the distance by Mexico City, where multiple industrial projects are progressing that represent little more than half of what is build in Monterrey.

Another region where the construction activity stands out strongly is the Bajío, which reports works at the quarterly close that almost reach 1.2 million square meters, a figure 82% higher than what was built a year ago. The data centers in the region that make up large surfaces are part of the trigger for this indicator and are built under the modality of custom-made projects.

Developers who are advancing in their respective works or planning their new industrial developments will continue to face the challenge of the scarcity of land with infrastructure, a situation that has worsened in markets such as Mexico City and Tijuana that demand to extend the industrial footprint beyond the markets usual.

The global geopolitical climate, mainly threatened by the conflict in Russia and Ukraine, will still have important consequences on energy and food prices, as well as the obstacles that continue to affect supply chains that have not returned to normal.

Internally, inflation and its impact on construction costs should be the focus of developers who are advancing in works. For those investors or portfolios with assets in operation, times of high inflation demand to be very attentive to the leverage, terms and rates of the financial instruments that support the operation, since the appetite will undoubtedly continue in the remainder of 2022 by well-located industrial assets.

Despite the important challenges, given the panorama of macroeconomic indicators that Mexico and the main economies of the world are going through, we believe that our country has advantages to compete and attract investment, in the real estate field we estimate that 2022 will continue with strong indicators of industrial demand and that it will be a year that could mark figures higher than those reported the previous year, when record figures had been reached.