Emerging Industrial Market: Monterrey, Mexico
18 Aug 2022
DemographicsMore than 5.2 million people live within a 25-mile radius of the Monterrey metropolitan area, with a projected growth rate of 6.5% over the next five years. The important 20-to-34 age group accounts for more than 25% of the total population. Within 75 miles, occupiers can reach nearly 6.6 million consumers.
Figure 1: Monterrey Population Analysis
Source: CBRE Location Intelligence
Figure 2: Monterrey Warehouse & Storage Labor Fundamentals
Source: CBRE Labor Analytics
According to CBRE’s Location Incentives Group, discretionary cash grants and tax abatements are among the top location incentives offered in Monterrey. The state government can also provide support in the following areas:
- Partnerships with or assistance from institutions such as the Federal Electricity Commission, Institute of Ecology, National Migration Institute and local universities.
- Assistance with labor force recruitment from the State Employment Office, including job fairs.
- Assistance with securing temporary office space for up to three months, subject to availability.
- Assistance with expeditiously securing all necessary permits and meeting all regulations for business operations.
- Assistance with finding suppliers.
- Providing discounts on border-crossing tolls for company truckers.
Figure 3: Top Incentive Programs
Source: CBRE Location Incentives Group
Monterrey is the capital of Mexico’s northeastern state of Nuevo León, with more than US$1.1 billion in foreign direct investment. The city is a three-hour drive southwest of the U.S. border in Texas and has a strong manufacturing base with convenient access to major highways connecting it to the deep-water ports of Brownsville approximately 200 miles east and Altamira approximately 300 miles southeast.
The Monterrey region has convenient air cargo service at both Monterrey International Airport (MTY) and Del Norte International Airport. Monterrey International is the busiest airport in northern Mexico, with a dedicated air cargo terminal that connects it to key logistics hubs across the U.S.
Supply & Demand
Monterrey has 128 million sq. ft. of industrial space across nine submarkets: Apodaca, Cienega de Flores, Escobedo, Guadalupe, Monterrey, Pesqueria, Salinas Victoria, San Nicholas and Santa Catarina. The market recorded more than 4.8 million sq. ft. of gross absorption in Q2 2022, 33% of it in new build-to-suit facilities in Salinas Victoria—effectively lowering this submarket’s vacancy rate to 0%.
As of Q2, Monterrey’s overall industrial vacancy rate was just 2.5%, down by more than 2 percentage points since January 1. More than 9.3 million sq. ft. of new construction is currently underway, including a 2.3 million-sq.-ft. manufacturing and office campus for furniture company Kuka Home in Nuevo León.
Manufacturing accounts for 52% of leased space in the Monterrey region, followed by the automotive (25%) and transportation & logistics (8%) sectors. Given recent supply chain disruptions worldwide, many U.S. companies are nearshoring operations closer to their main customer base. For example, Mattel is consolidating its North American manufacturing operations to its Monterrey factory, with plans for a $47 million expansion.
Industrial rental rates in Monterrey have increased by an average of 15.6% in the first half of 2022 due to inflation and low availability. Submarkets with the highest asking rents include Apodaca, Guadalupe and Pesqueria.
Figure 4: Monterrey Historical Data
Source: CBRE Research
Figure 5: Monterrey Size Range Comparison
Source: CBRE Research