Mexico’s Nearshoring Boom: Real Estate Surges Amid Economic Uncertainty

By Velizar Velikov, Head of M&A Database at EMIS

This year has been turbulent for Mexico, with the peso experiencing a sharp decline following the June presidential elections, where Claudia Sheinbaum of the ruling National Regeneration Movement (MORENA) secured victory. The result has cast doubts on the likelihood of accelerated reforms, contributing to subdued M&A activity as foreign investors remain hesitant to deploy capital. Additionally, economic forecasts are bleak, with GDP expected to grow by just 1.5% in 2024.

However, amid these challenges, Mexico’s real estate market is witnessing a surge in investment, fueled by the ongoing nearshoring trend. The industrial sector, especially in the country’s northern regions, is drawing significant attention. While nearshoring is still in its early stages – currently contributing only around 0.2% to Mexico’s GDP, according to Mark Thomas, the World Bank’s country director for Mexico, Colombia, and Venezuela – the momentum shows no sign of slowing. Cities like Saltillo, Monterrey, and Ciudad Juárez are reaping the benefits, with U.S. companies, particularly in manufacturing and automotive, occupying a substantial portion of industrial space. Canadian and Chinese firms are also becoming notable players in this transformation.

M&A activity in the real estate sector reflects this robust interest. Mexican real estate investment trusts (REITs) have been actively acquiring properties throughout Mexico City, Chihuahua, Querétaro, and Nuevo León in 2024. One of the year’s most significant transactions was the USD 354.3mn purchase of the Mitikah mixed-use complex in Mexico City by Fibra Uno in September. In the industrial real estate space, the largest deal thus far involved Fibra Mty’s USD 206.6mn acquisition of eight Class A properties in Nuevo León in March.

Despite these deals, the performance of Mexican REITs on the local stock exchange has been lackluster. Real estate trust certificates have underperformed, with Fibra Uno, FIBRA Prologis, and Fibra Mty all losing ground year-to-date. This downturn could present a ripe opportunity for increased M&A activity, as companies may consider consolidations to achieve cost synergies or attract interest from foreign investors eyeing a sector poised to benefit from nearshoring for years to come.

Signs of this potential shift are already emerging. One of the largest M&A transactions in Mexico during the first nine months of 2024 was Fibra Uno’s USD 2.45bn acquisition of 77.1% of Terrafina in August. As U.S. companies continue to set up operations in Mexico and local REITs struggle with stock performance, further M&A activity is likely, particularly within the booming industrial property sector.

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