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Warehouses Boom On Border As Manufacturing Moves To Mexico

Warehouses Boom on Border as Manufacturing Moves to Mexico

Warehouses Boom on Border as Manufacturing Moves to Mexico

The surge of migrants crossing the US border with Mexico and arriving in cities like New York has grabbed all the headlines—including recent news that migrants in NYC are asking for winter coats and bus tickets to Canada, which is welcoming new immigrants as an expansion of its labor force—but a surge in logistics facilities in towns on the southern border with Mexico is a long-term trend that will have a much larger impact on the US economy. In fact, it’s not a stretch to suggest that both of these trends might intersect in the near-future: with many migrants returning to—or staying near—the Mexican border to help fill the growing number of warehouse jobs that are being created in cities like Laredo, El Paso and San Diego, as well as Tijuana and Tucson, facilities that will need a growing workforce for years to come as labor shortages are expected to persist. The reshoring of manufacturing and supply chains from Asia—which got a big shout-out from President Biden in his State of the Union Address on Tuesday—is creating a surge in new manufacturing facilities in Mexico, which in turn is fueling development of new and expanded industrial space in border towns. Logistics players and investors, including Prologis and Morgan Stanley, now are focused on developing warehouses along the border in Texas and California, according to a report in the Wall Street Journal , which called the trend “nearshoring.” Morgan Stanley said it is investing in industrial developments encompassing nearly 2M SF on the border. “Today we’re seeing companies manufacturing goods in Mexico and using north of the border for distribution,” Lauren Hochfelder, co-CEO of Morgan Stanley Real Estate Investing, told WSJ. At last month’s North American summit meeting in Mexico City, President Biden and the leaders of Canada and Mexico agreed to strengthen regional supply chains. During the first nine months of 2022, foreign direct investment in Mexico surged to more than $32B, its highest level in nearly a decade. Prologis already owns nearly 44M SF of industrial space in Mexico, with occupancy levels that reached 98% in Q4 2022; the logistics giant broke ground last year on 4M SF of new industrial supply in Mexico. Nearshoring-related relocations and expansions accounted for half of the industrial demand in Mexico in 2022, concentrated in border areas including Monterrey, Juarez and Tijuana, WSJ reported. According to Prologis, demand for business in Mexico was “the highest ever” last year. The supply chain disruptions during the pandemic caused many manufacturers to speed up plans to move manufacturing from China to Mexico. TPG, Clarion Partners and CBRE are among the CRE firms zeroing in on investments along the border, the report said. The shift of manufacturing to Mexico is also boosting manufacturing in the US, as components for advanced equipment including electronics and medical devices are being made in Mexico and sent to factories in the US for final assembly.

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Daisie Hobson

Daisie Hobson is a Director at the Reshoring Institute and an engineer with many years of experience in manufacturing and project management.

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