According to Rafael McCadden of Colliers International Mexican industrial real-estate occupany and absorption rates are healthy.

Tecma Group of Companies:

Hello, and welcome to another installation of Tecma Talk podcasts. If you are a frequent listener to these recordings, you know that they consist of discussions with individuals that are experts in issues dealing with manufacturing in Mexico or related topics. Today is no different. We have the distinct pleasure of having an opportunity to converse with one of my favorite folks to chat with. His name is Rafael McCadden. He is with Colliers, which is a very well-known global industrial real-estate firm. He’s based out of Mexico City. I’ll let him introduce himself to you, and to provide a little bit of background information before we take on today’s questions. Rafael, how are you?

Rafael McCadden:

I’m good. How about you?

Tecma Group of Companies:

Couldn’t be better. Thanks.

Tell us a little bit about yourself so that the listeners have an understanding of the context from which you speak.

Rafael McCadden:

Sure. Thank you. Well, I have been in real-estate for over thirty years. I have been in industrial real-estate for twenty years now, and with Colliers as director of the industrial and logistics division in Mexico for over ten years. It has been a very exciting career. I can say that it is very interesting to see what is happening with industrial real-estate in Mexico.

Tecma Group of Companies:

Rafael, the last time we spoke, and it’s been quite a while. Actually, it has been over a year. At that time you had commented that Mexico had pretty much succeeded in emerging from the difficult period that began in 2008, and that the market had picked up for industrial real-estate in Mexico on a national level. Is that trend continuing? If yes, can you provide us any statistics that will give us an idea of what the activity levels of today are?

Rafael McCadden:

Sure. I would say that the trend continues to be positive in most markets in Mexico. Vacancy rates continue to come down. Net absorption rates are rising. There are a few things that make this happen. One, I would consider, is being neighbors with the US. I would say that this is the most important factor. Sharing a 2,000 mile border with the United States is one of the most important things that has promoted and benefited industrial real-estate in Mexico. Another thing is that the “baby boomer” generation in Mexico is in its mid-20s. This is a very important consideration in that it is generating a lot of people coming out of school that are eager to work. That has helped a lot in terms of hiring and maintaining low turnover rates. Companies are recognizing that there are plenty of young engineers available to hire for design centers, technical centers and, of course, for manufacturing lines, as well.

Tecma Group of Companies:

So, all in all, things are still looking positive. Would this be a safe assumption to make?

Rafael McCadden:

Yes, definitely. Now some of the regions in Mexico do have, I would say, a more prosperous growth and set of circumstances. The Bajio region, which includes four states that are located to the north of Mexico City that are Aguascalientes, San Luis Potosi, Guanajuato and Queretaro, are the ones that are posting the best numbers in terms of growth. This is mainly because of investment that is occurring in the automotive industry. There are four new Japanese assembly plants in the region. It is also said that there are over 300 Japanese suppliers to the automotive industry that have moved in. Of course, that is huge. In a period of less than five years, Mexico has duplicated its automotive production capacity.

It’s not only Japanese companies, however. BMW has begun the construction of its new assembly facility in San Luis Potosi, and, just Southeast of Mexico City, in the State of Puebla, Audi is almost ready to roll out new production [...]