Monterrey, Nuevo León—Once a booming industrial real estate hub driven by proximity to the United States and international interest, Monterrey’s market is now showing signs of stabilization. The initial surge in demand for industrial spaces and land, particularly spurred by Tesla’s announcement in March 2023 to build a mega electric car factory in the region, has since slowed. While the market remains strong, prices and developments are leveling out after a period of rapid growth.
Tesla’s Impact and Market Dynamics
Tesla’s decision to build a new plant in Monterrey sent ripples through the industrial real estate market in early 2023. Prices for both rentals and land soared as investors anticipated the arrival of the electric car giant. However, recent developments have seen the rapid pace of price increases tapering off. Alejandro Delgado, Country Manager for Mexico at real estate analysis firm SiiLA, highlights that Monterrey’s industrial growth trajectory had already been on the rise before Tesla’s announcement.
“Even prior to Tesla’s involvement, indicators such as absorption rates and price increases were trending upward. With the announcement of the factory’s construction, the market experienced a more pronounced spike, especially in rental prices and land values,” said Delgado.
Following the Tesla announcement, rental prices grew significantly, seeing increases of more than 10%. However, the momentum has shifted. By mid-2023, year-on-year rental growth exceeded 15%, but by the second half of the year, this increase had slowed to 6-8%.
Current Market Figures and Trends
According to data from real estate firm Newmark, the average rental price per square meter for industrial properties in Monterrey stood at $5.90 at the end of the first half of 2023. A year later, in the same period of 2024, that value had risen to $6.87, representing a slower but steady growth rate.
While prices have stabilized, the construction of new industrial spaces in Monterrey continues at a rapid pace. Consulting firm CBRE reported that in the first half of 2024, 757,000 square meters of industrial space were occupied in the Monterrey region, reflecting a 4% increase from the same period in 2023. Furthermore, over 1 million square meters were added to the market’s inventory, bringing the total industrial space in Monterrey to 15.3 million square meters by mid-2024.
Ramón Flores, Executive Vice President of CBRE Mexico’s Northeast Division, commented on the region’s economic growth, noting that Monterrey’s expanding industry is a key driver for the development of industrial real estate. “The state’s industrial and economic growth continues to push forward the development of the industrial real estate market. The inventory is growing rapidly, and we see this trend continuing,” said Flores.
Tesla Factory Paused Amidst U.S. Political Uncertainty
In July 2024, Tesla CEO Elon Musk announced a temporary pause in the construction plans for the Monterrey plant, citing concerns over the upcoming U.S. presidential elections in November 2024. Despite this pause, Monterrey’s industrial market remains resilient, with sustained demand for high-quality industrial spaces, particularly Class A buildings—those which meet the highest standards in construction, sustainability, and comfort.
SiiLA’s Alejandro Delgado emphasized that Monterrey’s industrial growth goes beyond Tesla. “The construction of new industrial spaces in Monterrey is being driven not just by Tesla but by the broader influx of companies from Asia setting up operations in the region,” Delgado explained.
Sector-Specific Growth and International Influence
Monterrey’s industrial real estate market is being bolstered by several key sectors. According to CBRE, the Miscellaneous Manufacturing sector accounted for 53% of the total occupied industrial space during the first half of 2024. Logistics and Transportation followed with 24% of total absorption, while the Automotive sector represented 18% of the occupied area.
In terms of international investment, companies from the United States led the charge, occupying 56% of the available industrial space in Monterrey during the first half of 2024. Mexican firms accounted for 13%, while companies from China occupied 10%.
With an average transaction size of 13,000 square meters and a vacancy rate of just 2.5%, Monterrey’s industrial real estate market remains tight, despite the pause in Tesla’s plans. The slight increase in vacancy was primarily driven by new developments and recent vacancies, but overall demand remains strong.
Outlook for the Rest of 2024
Despite the pause in Tesla’s construction plans, the industrial real estate market in Monterrey is expected to remain positive throughout the rest of 2024. CBRE forecasts that the completion of ongoing projects, combined with the end of Mexico’s election cycle, will support the market’s continued growth.
Monterrey’s industrial market continues to be a key player in Mexico’s economic landscape, and with stabilization now taking place, the region remains a crucial hub for manufacturing and logistics, both for local and international companies.
The broader implications of Tesla’s pause, however, will likely depend on the outcomes of the U.S. elections and the global economic outlook as 2024 unfolds. Nonetheless, Monterrey’s strategic position and strong industrial base ensure that it remains a top destination for companies looking to establish operations in Mexico.
As the year progresses, all eyes will be on whether the stabilization seen in 2024 will hold steady, or if new developments and political shifts will once again alter the course of Monterrey’s industrial real estate market.
