Led by Automotive Sector Occupancies, the Mexican Industrial Market May Be Impacted by Tesla Factory Suspension

The announcement of the construction of the Tesla factory in March 2023 triggered increases in rental values and land prices in the Monterrey market, a phenomenon known as the "Tesla effect." However, other factors were also at play.  

Before the announcement, the logistics real estate market in the capital of the state of Nuevo León had already been experiencing rental value increases, driven mainly by the growing demand for industrial spaces and reduced supply. This situation led to a decline in vacancy rates in Monterrey and other major industrial markets throughout Mexico.  

More than 16 months after the announcement, the industrial market in Mexico faces a different reality. Overall, the sector's dynamism during the first half of 2024 was slower than observed in 2022 and 2023. Factors such as the saturation of the power grid, elections, and the upcoming renegotiation of the free trade agreement between Mexico, Canada, and the United States have slowed absorption rates in major markets.  

This decrease in demand is compounded by an increase in construction levels, making the first half of 2024 the period with the highest construction activity in four years, surpassing absorption levels for the first time during this period. This has increased the vacancy rate, which had been declining since mid-2020 and remained low until the end of 2023.

Mexico remains an attractive destination for investments due to its favorable foreign policy, 14 free trade agreements with more than 50 countries, and the political stability and strength of its institutions, which are important factors for investor confidence.  

While Mexico's domestic policy determines its long-term attractiveness, current conditions indicate that the country remains a favorable location for foreign investments. In a global context where political tensions may deter investments in other countries, Mexico offers a more stable and business-friendly environment, whether due to its macroeconomic conditions, its strong trade relationship with the United States, its regional tax incentives—particularly in the north of the country—and the strength of its industrial real estate sector.  

This sector, it is worth noting, mainly benefits from the nearshoring trend as companies seek to bring their supply chains closer to key markets like the United States, mitigating risks and reducing operational costs.

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In Brazil, there is no similar movement yet. The first half of 2024 recorded 79,304 electric vehicle registrations, according to ABVE (Brazilian Electric Vehicle Association). There are over 300,000 electrified vehicles in circulation in the country. Data from the Ministry of Transport also reveal that the total vehicle fleet is estimated at 119 million cars.  

BYD, for example, is investing heavily in Brazil, and there is a growing importation of vehicles coming directly from China. According to ABVE, BYD dominates the ranking of electrified light vehicles, with three models from the automaker taking the top spots in sales.  

What may also benefit this market is the recent approval by the President of the Republic, Luiz Inácio Lula da Silva, launching the Mover program, a Brazilian automotive policy focused on vehicles with greater energy efficiency and environmental sustainability.  

However, in a decision supported by traditional vehicle manufacturers operating in Brazil, a new tariff was approved, raising the import tax on electrified vehicles. The measure took effect on July 1st.