U.S.-Mexico Border Towns Draw Investment As Industrial Demand Grows

Big names in industrial real estate and investment such as Prologis and Morgan Stanley are investing heavily in strategically located warehouse space close to and in Mexico as manufacturers turn their attention to facilities closer to home.

Many manufacturers and logistics companies were already looking at moving production to Mexico, The Wall Street Journal reported, but the supply chain snarls in Asia that dominated headlines in the first two years of the pandemic  pushed their timelines forward. That shift has meant a plethora of new opportunities for industrial real estate along the border. 

“Today we’re seeing companies manufacturing goods in Mexico and using north of the border for distribution,” Morgan Stanley Real Estate Investing co-CEO Lauren Hochfelder told the WSJ.

The firm is investing in about 2M SF of new border developments.

Border cities such as San Diego, El Paso and Laredo, Texas, and Tucson, Arizona, are all being eyed as targets for investors, according to the WSJ. TPG Inc., CBRE Investment Management and Clarion Partners have either invested in property in the region or plan to, the WSJ reported. 

On the ground, some of these cities are seeing the surge in attention translate to a demand the supply can't yet keep up with. 

"We have all these properties being developed — horizontal developers, vertical developers, but right now the inventory is effectively zero," Laredo Economic Development Corp. CEO Gene Lindgren told Bisnow in July.

Industrial space in Mexico is also a growing market. Prologis owns about 44M SF of industrial there, 4M SF of which broke ground in 2022, according to the WSJ. In the fourth quarter of last year, occupancy in Mexico was 98%.