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2006 Tijuana Update | 2005 Tijuana Update

2006 Tijuana Industrial Real Estate Update

Tijuana keeps growing, although at a slower pace than our last mini-boom of 2004-2005. Automotive, medical, sporting goods, furniture, plastics and electronics companies continue to establish new facilities in the Greater Tijuana Industrial Market. Net absorption of industrial real estate by new or expanding companies for the first half of 2006 totaled 392,000 SF, which is less than half of the pace of both 2004 and 2005. However, Mexico’s share of US automotive and medical products manufacturing is growing rapidly. Exports rose 40% and 25% respectively from 2005 levels. (BBVA Situacion Mexico-Tercer trimestre 2006)

CENDII
Source: CENDII

As one can see from the chart above, the number of employees has reached a recent high just over the year 2000 peak. This is one of the most reliable and up to date statistics available. There is a strong correlation between this number and demand for space. Therefore, we anticipate a strong resurgence in the overall real estate market.

Vacancy and Rates:

It is a seller/lessor market in Tijuana with only 2 million SF available out of a total 45 million SF (4.4%). Class A space is being leased before the buildings are completed in well located markets like Mesa de Otay. High quality buildings in Otay are renting for up to $0.49/SF NNN Shell. Average lease rates in Otay are closer to $0.41/SF NNN. For the city as a whole, the average NNN rents have increased about 4% to 0.39/SF.

Most of the available buildings in the greater Tijuana area are newly constructed, (Modern Grade A buildings with high ceilings plenty of docks and lot coverage of less than 50%) as the last two years of net absorption, has occupied the majority of previously available second-generation space.

Class of facilities available in August 2006

Industrial Land Prices

Well located industrial land prices in the greater Tijuana area, reflecting the US real estate market have shot to over $135/SM ($546,000/Acre), higher than most US industrial land prices. This increase is caused by the lack of land with industrial infrastructure near the border. The Mexican Government is flush with cash as oil price continue to spike and so many roads are being built, including the long awaited Blvd. Tijuana 2000 to Rosarito. This should increase the supply of usable industrial land, therefore stabilizing or reducing the current pricing trend. The new Maquila Program rules should also boost maquiladora growth. The new program includes clarifications and streamlining of existing regulations. See attached link: http://www.signonsandiego.com/news/mexico/tijuana/20060816-9999-1b16maquila.html

New companies or expansions of note include:

Camtech Plastics leased 79,000 SF in Limon Industrial Park. This client of Maquila Properties is establishing a state of the art plastic injection and coating factory to supply the local consumer electronics industry.
Enkeboll, a manufacturer of carved, wood products leased 50,000 SF in Ciudad Indutrial (Otay Mesa).
Welsh Allyn leased a newly constructed 100,000 SF facility in Matamoros. where they will be making medical products.
Benson Industries expanded to a 170,000 SF facility in Matamoros for its high-rise, glass building components.
Nippon Express, a logistics and warehousing company leased 80,000 SF in Ciudad Industrial.
Corrugados (Orange County Container) leased a 90,000 SF warehouse in Otay.
MPAA, a re-manufacturer of automotive products expanded with an additional 120,000 SF in El Lago.
Hwa Sin leased the former, 200,000 SF Mattel facility in La Mesa.
Rainbird is in final construction on a 120,000 SF facility in El Lago.
BTS a logistics services company, leased 60,000 SF in Valle del Sur
Medegen, another Medical Company leased 40,000 at Prologis.
Eaton Aerospace leased 60,000 SF in Tecnomex Industrial Park.

The author, Jean-Paul de Kervor has 18 years experience representing US and Multinational Industrial Corporations in the San Diego / Baja Region. He speaks fluent French, Spanish, and English and holds a BS in Chemistry as well as an Mba in International Business. To reach Mr. de Kervor, call 1-858-551-8000, or email to jp@maquilaproperties.com or go to www.maquilaproperties.com.