Nearshoring boom: is northern Mexico still undervalued?

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THE LATINVESTOR

A team specialized in real estate investing in LATAM countries

We are a team of financial experts, legal professionals, developers, and local real estate specialists dedicated to helping people like you avoid mistakes when investing in real estate in a foreign place, particularly in Mexico. If you'd like to learn more about us, you can check our presentation page.

What's the current cost per square meter for industrial land in northern Mexico compared to Texas and U.S. border states?

Industrial land in northern Mexico costs significantly less than comparable properties in Texas and U.S. border states.

In Monterrey, the region's industrial hub, land prices average USD 3,651 per square meter as of September 2025, representing approximately 10% annual growth. This reflects the city's position as Mexico's manufacturing capital and its proximity to major U.S. markets.

Texas industrial land averages USD 65.80 per square meter, making it roughly 55 times cheaper than northern Mexico's premium locations. However, this comparison requires context since U.S. properties typically include more developed infrastructure and utilities.

U.S. border cities like El Paso and Laredo offer warehouse spaces at USD 2,424-3,390 per square meter, still significantly higher than Mexico's industrial zones. The price differential creates substantial opportunities for manufacturers seeking cost-effective expansion while maintaining proximity to U.S. markets.

It's something we develop in our Mexico property pack.

How fast have industrial rents been rising in Monterrey, Saltillo, and Ciudad Juárez over the past three years?

Industrial rental markets in northern Mexico's key cities have experienced explosive growth driven by unprecedented nearshoring demand.

Monterrey leads with the most dramatic increases, seeing industrial rents rise 39-50% over the past three years. This growth reflects the city's status as Mexico's industrial powerhouse and its ability to attract high-quality international tenants willing to pay premium rates for modern facilities.

Saltillo recorded a 26.5% year-over-year rent increase as of late 2024, among the highest growth rates in Mexico. The city's automotive manufacturing cluster and strategic location between Monterrey and the Texas border have created intense competition for quality industrial space.

Ciudad Juárez, despite being closer to the U.S. border, has seen more moderate but still substantial growth of 8-10% annually. This reflects the city's larger inventory of available space and its role as a more established maquiladora center with greater supply elasticity.

What's the average vacancy rate right now in Class A industrial parks across northern Mexico?

Class A industrial parks across northern Mexico maintain exceptionally tight vacancy rates, indicating strong demand and limited supply.

Saltillo shows the tightest market conditions with vacancy rates as low as 0.8% in premium industrial parks. This ultra-low vacancy reflects the city's position as a rapidly growing automotive manufacturing hub with limited new supply coming online quickly enough to meet demand.

Monterrey maintains vacancy rates around 3% for Class A facilities, still well below the 5-7% rate typically considered balanced. The city's diverse industrial base spanning automotive, electronics, and aerospace creates consistent demand across multiple sectors.

Ciudad Juárez shows slightly higher vacancy rates around 10% for Class A space, reflecting its larger inventory and more established maquiladora infrastructure. However, even these rates indicate a healthy, active market with strong absorption of new space.

Overall, northern Mexico's average Class A industrial vacancy remains under 5% across most premium developments, creating pricing power for landlords and challenging conditions for tenants seeking quality space.

How many new industrial parks are under construction in states like Nuevo León, Chihuahua, and Coahuila?

Northern Mexico states are experiencing a massive industrial development boom with dozens of new parks under construction as of September 2025.

This development pipeline represents the most aggressive industrial construction phase in northern Mexico's history, driven by companies relocating production closer to U.S. markets.

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What are the average labor costs for skilled manufacturing workers in northern Mexico compared to Texas?

Labor cost advantages remain one of northern Mexico's most compelling attractions for manufacturers considering nearshoring operations.

Skilled manufacturing workers in northern Mexico earn USD 4.90-6.10 per hour on average, representing dramatic savings compared to equivalent positions in Texas. This includes workers with technical certifications, assembly line supervisors, and quality control specialists.

Texas skilled manufacturing labor costs average USD 18-28 per hour for similar roles, creating a cost differential of approximately 75-80%. This gap provides manufacturers with substantial operational savings while maintaining access to a skilled, trained workforce.

The minimum wage in Mexico's northern border zone is approximately USD 20.72 per day, but skilled positions command significantly higher wages. Many manufacturers report that even after accounting for training, supervision, and productivity differences, labor cost savings exceed 60% compared to U.S. operations.

It's something we develop in our Mexico property pack.

How much has U.S.–Mexico trade through the main northern border crossings grown in the past five years?

U.S.-Mexico trade through northern border crossings has experienced remarkable expansion, fundamentally reshaping regional economic dynamics.

El Paso and Laredo now account for over 5% of all U.S. industrial leasing activity, up from just 1% five years ago. This represents a five-fold increase in the border region's importance to U.S. industrial real estate markets.

Bilateral trade volumes have reached record levels, creating synchronized economic cycles between northern Mexican cities and their U.S. counterparts. Major crossings in Ciudad Juárez, Nuevo Laredo, and Reynosa have all reported substantial increases in manufacturing goods flow.

The growth has been so significant that border infrastructure is struggling to keep pace, with customs and inspection delays becoming a notable bottleneck for continued expansion. This trade surge directly translates into increased demand for industrial facilities on both sides of the border.

What kind of infrastructure bottlenecks are investors currently facing in northern Mexico?

Infrastructure challenges represent the primary risk factor for industrial property investors in northern Mexico's booming market.

Energy supply and grid instability top the list of concerns, with 30% of nearshoring firms having abandoned expansion plans due to insufficient power capacity. The electrical grid struggles to support energy-intensive manufacturing operations, particularly in newer industrial zones.

Water shortages affect multiple northern states, creating operational risks for manufacturing facilities that require substantial water usage. This issue is particularly acute in Chihuahua and parts of Nuevo León during dry seasons.

Border crossing delays and customs bottlenecks slow just-in-time manufacturing operations, with some crossings experiencing 2-4 hour delays during peak periods. Highway and port development hasn't kept pace with trade volume increases, creating logistical challenges for time-sensitive operations.

Despite these challenges, most investors view infrastructure issues as manageable short-term hurdles rather than fundamental barriers to nearshoring success.

How do electricity costs in Monterrey or Juárez compare to Houston or Dallas for industrial users?

Electricity pricing presents a complex comparison between northern Mexico and Texas industrial markets.

Nominal electricity rates in Monterrey and Ciudad Juárez remain lower than Houston or Dallas for industrial users. Mexico's subsidized energy pricing structure provides cost advantages for manufacturers, particularly those with high energy consumption.

However, grid instability and supply constraints in northern Mexico create additional costs and risks that don't exist in Texas markets. Power outages, voltage fluctuations, and the need for backup generation systems can significantly increase total energy costs for industrial operations.

Energy-intensive manufacturers often find that while base rates favor Mexico, the total cost of reliable power—including backup systems and downtime protection—can approach or exceed Texas levels. This makes energy considerations crucial for industrial property investment decisions.

The Mexican government has announced grid modernization investments, but these improvements are still 2-3 years away from completion in most northern industrial zones.

We did some research and made this infographic to help you quickly compare rental yields of the major cities in Mexico versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.

What incentives are local and federal governments offering to foreign manufacturers setting up in northern Mexico?

Mexican government incentives for foreign manufacturers have expanded significantly to support the nearshoring wave.

Federal programs include expedited permits through new investment tracking systems and AMPIP certification processes that streamline approvals for qualifying projects. Tax incentives target specific industries like automotive, electronics, and medical devices.

State-level incentives vary by location, with Nuevo León offering some of the most aggressive packages including reduced property taxes, infrastructure support, and worker training subsidies. Coahuila provides similar incentives focused on automotive cluster development.

Priority corridors receive enhanced support, with dedicated government liaisons helping foreign investors navigate regulatory requirements. These programs aim to reduce the typical 6-12 month setup timeline for new manufacturing operations.

Local municipalities often add their own incentives, including expedited construction permits, utility connection support, and workforce development partnerships with local technical schools.

Which industries are driving the largest share of nearshoring investments in this region?

Three key industries dominate nearshoring investment flows into northern Mexico's industrial property market.

1. Automotive Manufacturing: Leads all sectors with the largest share of nearshoring investments, building on Mexico's established automotive supply chain and proximity to U.S. assembly plants
2. Electronics and Technology: Growing rapidly as companies diversify supply chains away from Asia, particularly for consumer electronics, semiconductors, and telecommunications equipment
3. Medical Devices: Expanding significantly due to supply chain security concerns and the need for closer proximity to U.S. healthcare markets
4. Aerospace Components: Increasing presence in specialized manufacturing zones, particularly around Monterrey's aerospace cluster
5. Textiles and Apparel: Returning to Mexico as companies seek alternatives to Asian production, especially for fast-fashion and specialty garments

Automotive manufacturing continues to generate the highest demand for industrial space, but electronics and medical devices are growing fastest in terms of new facility announcements and square footage requirements.

How much foreign direct investment has actually landed in northern Mexico in the past two years?

Foreign direct investment flows into northern Mexico have reached unprecedented levels over the past two years.

Nuevo León has attracted the largest share of FDI, with billions in commitments from automotive, electronics, and aerospace manufacturers. The state's diversified industrial base and proximity to Monterrey's logistics infrastructure make it the top destination for large-scale manufacturing investments.

Chihuahua has captured substantial investment flows, particularly in electronics manufacturing and automotive components. Ciudad Juárez continues to benefit from its established maquiladora infrastructure and direct border access to Texas markets.

Coahuila has seen significant automotive-related FDI, building on its existing manufacturing cluster around Saltillo. The state's 39% rent growth reflects this investment pressure and competition for quality industrial space.

The high-quality foreign tenant base has driven robust leasing activity, with international companies typically willing to pay premium rents for modern facilities that meet their operational and compliance requirements.

What's the forecasted demand for industrial space in northern Mexico over the next five years?

Demand forecasts for northern Mexico's industrial space remain exceptionally strong through 2030, driven by continued nearshoring momentum.

Current supply is struggling to keep pace with demand despite aggressive new construction. While inventory growth exceeds historical cycles, absorption rates are projected to remain healthy as more manufacturers commit to Mexican operations.

Vacancy rates may rise slightly due to the aggressive new park development pipeline, but this is expected to represent a temporary rebalancing rather than oversupply. Most analysts project vacancy will stabilize around 3-5% for Class A space, still indicating a landlord-favorable market.

The forecasted demand growth is particularly strong for modern, large-format facilities capable of supporting advanced manufacturing operations. Smaller, older facilities may see weaker demand as companies prioritize efficiency and compliance with international standards.

Supply is catching up gradually in top corridors like Monterrey and Saltillo, but new demand continues to outpace completions in most submarkets.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

Sources

1. The Latinvestor - Mexico Real Estate Market Outlook
2. Maxx Builders - Texas Commercial Construction Costs 2025
3. NovaLink - Mexico's Manufacturing Labor Rates
4. PGIM Real Estate - US-Mexico Border Industrial Markets
5. Mexecution - Mexico Industrial Real Estate 2025
6. SIILA - Q2 2025 Industrial Vacancy Report
7. Relocation SRS - New Industrial Parks Mexico
8. UCSD - US-Mexico Trade Report 2025
9. AI Invest - Mexico Energy Crossroads Analysis
10. International Bar Association - Mexico Nearshoring Future