Future Cities
2023 North America Industrial Big Box Review & Outlook: Mexico City
April 4, 2023 5 Minute Read
Mexico City is opening new corridors for cargo along with the new Felipe Angeles Airport, in the heart of the metropolitan area. In 2022, 5.7 million sq. ft. were added to the inventory. The year-end vacancy rate was a historical low of 1%, led by the strong activity in the market. Leasing activity continues to accelerate. 3PLs and EV production is arriving to the city because of the metro area’s high-talent labor pool. Developers continue to acquire more land in the eastern and northern part of the city.
Demographics
Mexico City is the world’s fourth-largest city, with a total population of 30 million within a 50-mile radius of the city’s core. This is nearly 10 million people more than Northern/Central New Jersey and by far the most of any market tracked in this report. Expanded to 250 miles, a warehouse occupier can reach nearly 83 million people, including the major cities of Guadalajara, Veracruz and Puebla.
Figure 1: Mexico City Population Analysis
Source: CBRE Mexico, INEGI, CONAPO, Q4 2022.
Mexico City’s warehouse workforce totals 374,958 people and this is expected to increase by 14% by 2032. The hourly wage for a warehouse worker is only $2.79 USD.
Figure 2: Mexico City Warehouse & Storage Labor Fundamentals
Source: Labor Analytics Mexico, Q4 2022.
*USD.
Location Incentives
CBRE’s Location Incentives Group reports that top publicly known incentives offered in Mexico City are discretionary cash incentives and tax abatements. The state government can also provide:
- Linkage with institutions such as the Institute of Ecology and Federal Electricity Commission
- Assistance from the State Employment Office in recruitment and selection of labor force
- Assistance with a provisional office for up to three months, subject to each city’s availability
- Consulting to companies on federal, state and municipal procedures
Figure 3: Mexico City Top Incentive Programs
Source: CBRE Location Incentives Group, Q4 2022.
Note: The extent, if any, of state and local incentive offerings depends on location and scope of the operation.
Logistics Driver
Mexico City is the start of the “NAFTA Highway,” running from Central Mexico towards Ciudad Juarez, along the Mexico-U.S. border. In Q2 2023, the metro area expects the first phase of its second airport to be fully operating: the Felipe Angeles, where mostly national passenger operations will occur. Mexico City is also well-connected to major Mexican ports: Veracruz, Manzanillo and Tampico, with estimated driving times from 4-7 hours.
Mexico City is the start of the “NAFTA Highway,” running from Central Mexico towards Ciudad Juarez, along the Mexico-U.S. border.
Capital Markets
New local developers are entering Mexico City, particularly from the northern markets. Mexico City’s increasing activity is because it is one of the three leading Mexican markets (with Monterrey and Tijuana) for high rents. More sales are expected as international institutional investors continue seeking further allocation to the logistics asset class in Mexico City.
Supply & Demand
With 63 million sq. ft. of total inventory, Mexico City is Mexico’s largest big-box market. Robust demand lowered the direct vacancy rate to 1% in 2022, from 1.3% in 2021, the fifth-lowest in North America. Transaction volume totaled 9 million sq. ft., 23% above the previous year. Robust leasing led to 5.9 million sq. ft. of positive net absorption. Food & beverage companies leased 28% of the space, followed by 3PLs at 17.3%.
Despite a low vacancy rate, only 4.1 million sq. ft. is under construction, with 54% pre-leased. Going forward, it is key for occupiers to ensure inventory levels to support Mexico City’s massive population and growing online consumption. This demand will keep vacancy rates near 1% and reliable rent growth for the foreseeable future.
Figure 4: Share of 2022 Leasing Activity by Occupier Type
Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research, 2022.
Figure 5: Lease Transaction Volume by Size Range
Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research, 2022.
Figure 6: 2022 Construction Completions vs. Overall Net Absorption by Size Range
Source: CBRE Research, 2022.
Figure 7: Direct Vacancy Rate by Size Range
Source: CBRE Research, 2022.
Figure 8: Under Construction & Percentage Preleased
Source: CBRE Research, 2022.
Figure 9: First Year Taking Rents (psf/yr)
Note: Taking rents are in $USD.
Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research, 2022.
Explore Big Box Insights by Market
Central Valley’s proximity to the affluent Bay Area gives it convenient access to more than 6.9 million people within a 50-mile radius.
Around 16.1 million people live within 50 miles of the IE’s core, the country’s second-largest industrial market population (behind Northern/Central New Jersey).
Over 15 million people live within 50 miles of the market core—the third most in the U.S. Nearly 26% of this population are aged 18-34.
Contacts
James Breeze
Vice President, Global Industrial and Retail Research
John Morris
President, Americas Industrial & Logistics, Advisory Services
