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| 2006 Tijuana Update | 2005 Tijuana Update |
| 2001 Tijuana Update The North American Free Trade Agreement (NAFTA) and an overvalued Peso are increasing costs for manufacturing companies in Baja. A US recession and tighter border controls in the wake of the 9/11 attacks is making business more difficult. Economic stagnation in Asia and China’s admittance to the WTO have lowered costs for Asian Manufacturing. Each of these factors are combining to reduce occupancy of Border manufacturing facilities. On the positive side, labor and top level managers are a dime a dozen, and highly improved facilities are available. Mexico’s Border
manufacturing industry has been hit by defections by Non-North American
firms who can no longer avoid Mexican duties using the Maquiladora or
in-bond Program. NAFTA -specifically Articles 303, 304- forbids the importation
of third country parts duty free. Although duties have dropped for North
American products, firms using Asian and European components and raw materials
are seeing their duty costs rise and many are returning to Asia and Europe.
SAFT (France) is subleasing their 160,000 SF Battery manufacturing plant.
Asahi electronics, Sanyo, Jabil Circuits , ALPS and others are also vacating
Baja facilities taking the Tijuana Industrial vacancy to the highest level
in 13 years. Although 7% vacancy seems like a balanced market to most real estate professionals, in Tijuana it is unheard of and rents are dropping, especially in the lower quality, older industrial areas. During recent years, landlords have been able to command $0.35 per SF/ Month for even dilapidated old buildings without basic lighting and power. Now, tenants have been leaving these older facilities and have been occupying better facilities for a similar price. As you can see from the chart below, almost half of the available buildings above 75,000 SF are C grade or below. A grade are Modern, Tilt-up construction with 50% land coverage ratios, high ceilings (24 ft.) and security. B grade buildings are often 5 year old, second generation facilities with up to 60% land coverage. C grade buildings usually have lower ceilings (16-18 ft.), block construction with more than 10 years of age and difficult truck maneuvering space or parking. D grade are usually "0 lot line" 15+ years old and have difficult truck access. F grade buildings are functionally obsolete or dangerous.
Industrial parks in older areas such as La Mesa and Colonia Linda Vista have vacancy rates as high as 50% for their smaller, usually C or D grade buildings. We predict that pricing will fall further in this segment of the market but should remain flat in the higher end buildings. Some of the major transactions Maquila Properties concluded this year were Border Trade Services with 141,000 SF in Otay, and 70,000 SF for Maxxim Medical in La Jolla Industrial Park. Rental Rates are ranging from $0.20/SF to $0.50/ Sf per month depending on Improvement level, averaging about $0.36/ SF or about $0.02/ SF less than last year. Construction prices remain in the $20/ SF range for shell buildings with 10% offices. Land prices are averaging $4/SF for finished industrial lots in Tijuana. The author, has 13 years experience representing US and multinational industrial corporations in the Baja Region. He speaks fluent French and Spanish and holds a BS in Chemistry as well as an Mba in international business. © Copyright J-P de Kervor 2001 |
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Maquila Properties, Inc
• 7486 La Jolla Blvd., #200 • La Jolla, CA 92037 © 2002 Maquila Properties |
