Leasing industrial real estate in Mexico is a popular option for foreign manufacturers. While foreign companies have many options for purchasing land or facilities, for the most part, a healthy competitive leasing market provides manufacturers with the amenities and options they need.
Below, we offer six tips to help manufacturers vet industrial real estate in Mexico. For even more insight, check out our podcast on industrial real estate costs in Mexico, part of Tetakawi’s Manufacturing in Mexico podcast series.
1. Proximity to labor
Being close to your workforce is essential, as unskilled workers in Mexico are not always mobile. They may not own a car, and public transportation is not always feasible. In many instances, manufacturers become an employer of choice by transporting workers to their factories. Depending on your location, the cost of transportation can range anywhere from $35 to more than $120 per employee per month. Companies not prepared to offer transportation often opt to locate close to neighborhoods with low-cost government housing.
2. Access to transportation lanes
Proximity to U.S. customers often attracts manufacturers to locate in Mexico, but it’s crucial to select a location with easy accessibility, generally located near major highways. For some companies, access to deep-sea ports, international rail, or international airports may also be important criteria for selecting industrial real estate in Mexico.
3. Utilities
Mexico has a good electrical grid system, yet power distribution may vary based on a particular location. It's also important to check whether your company might be expected to pay for distribution to your location or installation of transformers on your site. It's typical for buildings for lease to have minimal lighting and electrical service, so manufacturers should expect to upgrade transformers and provide additional lighting as a leasehold or capital investment. When setting up electrical utility, plan to pay a one-time demand fee of approximately USD $100 per KVA above 200 KVAs.
It's also vital to ensure accessibility to sufficient water. Check on restrictions on use and if there is a potential to upsize water mains or supply. In general, water supplied through the mains is not potable. If potable water is needed, ensure filtered water is available.
And while natural gas in Mexico is available in many places, it's not distributed throughout the entire country. As a result, it's important to check whether it can be supplied to your facility in advance.
For more information about utility costs in Mexico, listen to this podcast:
4. Build out potential
If you’re looking for industrial real estate in Mexico that can be adapted to meet your unique manufacturing needs or has the flexibility to change as you grow, it’s essential to consider your options upfront. Leasehold improvements are generally allowed, usually with an expectation that the building is returned to its original state upon being vacated. Many industrial parks and some multi-tenant buildings restrict external changes to their building, particularly as they affect appearance.
In general, developers permit internal changes that are not financed by them without any significant restrictions. Some developers will finance improvements, but it’s not an expectation, so it’s important to understand what you are getting in the base building, what changes you are allowed to make, and who will pay for any renovations.
For major changes, manufacturers may consider a build-to-suit option. There are some excellent companies in Mexico that can provide high levels of customization as well as leasehold or lease-back options.
5. Amenities and services
Manufacturers have the option of building at a standalone site, but many opt to operate within an existing industrial park. In addition to providing space, parks may offer a range of amenities. These range from bare-bones offerings where tenants must seek out their own services to Manufacturing Communities supported by shelter service providers. Even with more comprehensive support, amenities can range. Common examples include shared employee transportation, medical care, recreational facilities, controlled entry, and security services.
6. Rate and lease terms
As is true of any country, location will dictate your lease rate. Lease rates are usually quoted per month per square foot or per square meter rather than as an annual number. Triple net lease rates in Mexico for industrial properties could be as low as USD $0.50 per square foot per month and as much as USD $0.85 per square foot per month. This may vary based on neighborhoods, proximity to certain services, and amenities available through your industrial park.
The more significant factor here to consider is what is included in your lease. The leasable area of a facility typically includes mezzanines and docks. Some landlords will add taxes, maintenance, insurance, and common area or park fees into their leases. A five- to seven-year term is typical of many leases. It's also important to note that lease agreements will be in Spanish. Because they're governed by Mexican law, the Spanish version of your lease takes precedence over an English translation.
Get more from your industrial real estate in Mexico
In most cases, class A industrial real estate in Mexico will meet the manufacturer’s requirements, but it’s important to perform due diligence prior to signing a lease. It’s also to know your options to ensure that you get the right balance of cost and support for your organization’s unique needs.
For companies that want to get their operations up and running as quickly as possible, a build-to-suit site within a Manufacturing Community that offers turnkey support is likely the best bet. This is an area where Tetakawi can help. Our Manufacturing Communities offer everything companies need to rapidly launch, operate and thrive in Mexico. Talk to one of our experts today to discover which Manufacturing Community might be right for you.
Thinking about manufacturing in Mexico? Download this ebook and start moving your due diligence forward.
