Future Cities

Emerging Industrial Markets: San Luis Potosi, Mexico

June 6, 2024 5 Minute Read

San-Luis-Potosi-hero

“San Luis Potosi (SLP) has several advantages for industrial and logistics tenants: large land reserves, competitive costs of land and labor and a strategic location connecting Mexico’s Central and Northeast regions. SLP is also a beneficiary of the automotive demand coming mainly from the U.S. and Germany.”

Yadira Torres-Romero

Managing Director, CBRE Mexico, Colombia & Costa Rica

Demographics

Just under 3 million people—28% aged 18 to 34—live within 50 miles (80 kilometers) of San Luis Potosi, and 80 million consumers are within 250 miles. SLP is approximately 206 miles (303 kilometers) northeast of Guadalajara and 250 miles (87 kilometers) north of Mexico City.

Figure 1: San Luis Potosi, Mexico, Population Analysis

 
Source: CBRE Location Intelligence, 2024.

SLP’s local-warehouse labor force of 78,225 is expected to grow by 6% by 2034, according to CBRE Labor Analytics. The average salary for a non-supervisory warehouse worker is US$3.65 per hour (base salary + mandatory benefits).

Figure 2: San Luis Potosi, Mexico, Warehouse & Storage Labor Fundamentals

 
Source: CBRE Labor Analytics, Americas Consulting, 2024.

Location Incentives

According to CBRE’s Location Incentives Group among the top incentives offered in SLP are discretionary cash grants and tax abatements. The state government can also provide support for labor recruitment and training.

Figure 3: Top Incentive Programs

 
Source: CBRE Location Incentives, Americas Consulting, 2024.
Note: The extent of state and local incentive offerings depends on location and scope of the operation.

Logistics Drivers

SLP offers numerous competitive advantages that make it an attractive destination for national and international investment. With its strategic location in the center of Mexico, the state serves as an important logistics and transportation hub, providing easy access to the country's main markets and to seaports on the Gulf of Mexico and the Pacific Ocean.

This geographical position allows companies to benefit from an efficient network of roads and railways, connecting SLP with other key cities and states.

SLP stands out for its diversity and strength in strategic sectors. The automotive industry is one of the main drivers of the local economy, with a strong presence of car manufacturers, auto parts producers and component suppliers.

Supply and Demand

San Luis Potosi (SLP) is a medium-sized market, with industrial Class A stock of 27.6 million sq. ft. SLP is divided into four submarkets, with 50% of existing inventory in the WTC/Logistik submarket. SLP is one of the four markets in the Bajio region and the tenth largest among the 13 main Class A markets in Mexico. SLP closed Q1 2024 with 1.1 million sq. ft. of gross absorption—a figure that tripled Q1 2023 and accounted for 40% of the activity in the Bajio region. Demand was driven primarily by light manufacturing and automotive sector tenants.

San Luis Potosi closed Q1 2024 with a vacancy rate of 2.5%—in line with the vacancy rate nationwide—and has trended downward for the last six months. Average asking rents closed Q1 2024 at $6.07 per sq.ft./year, registering an annual growth of 29%. SLP’s rent remains competitive compared to the Saltillo market, in the northeast of the country, despite Saltillo’s closer proximity to the U.S.-Mexico border. Submarket asking rents vary between $4.92 - $5.63 per sq. ft./year.

San Luis Potosi market is characterized by build-to-suit development; at the end of Q1 2024, 64% of the construction activity was pre-leased. This trend is expected to continue throughout the year. The manufacturing sector led demand during Q1 2024; however, high demand is expected from the automotive sector, which accounted for 71% of SLP’s total industrial activity in 2023. In addition, logistics tenants continue to locate in the WTC Industrial Phase 3, which has a surface area of 10 million sq. ft. with infrastructure and is ideally suited for tenants in that industry. Of the four logistics companies located in WTC, Coppel is the largest, with an area of 138,000 sq.ft.

In May of this year, BMW began construction of its new 861,000-sq.-ft. battery module production center, as part of its plan to begin production of Neue Klasse vehicles in 2027, thereby becoming the first manufacturer to produce fully electric vehicles and high voltage batteries in Mexico. The San Luis Potosi plant will be BMW's third to produce Neue Klasse vehicles, after the plants in Debrecen, Hungary, and Munich begin operations in 2025 and 2026.

Figure 4: San Luis Potosi, Mexico, Historical Data

 
Source: CBRE Mexico Research, 2024.

Figure 5: San Luis Potosi, Mexico, Size Range Comparison

 
Source: CBRE Mexico Research, 2024.

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