The beginning of the year was marked by an uncertain economic environment in which the US president constantly threatened to impose tariffs on Mexican exports. The tariffs could have a negative impact, especially on the export industry to the United States.

In this scenario, the industrial real estate market in Mexico showed less momentum than in previous periods. Border markets, such as Tijuana and Reynosa, where there is greater dependence on US companies, showed less encouraging performance than other markets in the country, especially those in the central, western, and Bajío regions, where domestic companies account for the largest share of demand.

At the close of Q1 2025, the country's industrial inventory grew by 1.7 million m², surpassing 106 million m². Among the markets that grew the most were Monterrey with more than 500,000 m², followed by Mexico City with 432,000 m², and other markets such as Guadalajara, Guanajuato, and Querétaro grew by more than 100,000 m². During this quarter, the construction of nearly 85 industrial warehouses was completed; only the markets of Tecate and Ciudad Juárez did not report new industrial space.

With the high volumes of new supply, the effect on vacancy has been an increase of more than 30 basis points nationwide. According to Solili figures, vacancy closed Q1 2025 with more than 3.5 million m² in Mexico, representing a rate of 3.3%. In the annual comparison, we can see that there are 1.5 million square meters more than reported in the same quarter of the previous year.

While it's true that vacancy rates in all markets in Mexico are at healthy levels, we have identified some where volumes are beginning to be robust and the supply is broad and diversified, such as Reynosa, Ciudad Juárez, Querétaro, San Luis Potosí, and Tijuana, markets that a year ago had limited space supply.

At the close of the first quarter of 2025, industrial leasing nationwide totaled just over 1.2 million m², representing a 20% contraction compared to the same period in 2024. This decrease was primarily due to the drop in demand for industrial space in border markets, where the US government's proposed tariffs have had a direct impact on the synchronization between these markets and different clients across the border.

Meanwhile, the country's net absorption totaled 1.2 million m² this quarter. The leading market nationwide is Mexico City with nearly 500,000 m² and Monterrey with 300,000 m². Tijuana and Reynosa are the two regions reporting the lowest net absorption, closing with negative figures, primarily affected by vacancy rates.

Despite declining demand levels during the first quarter of the year, construction remained very active, and developers maintained confidence in the potential of the Mexican real estate market. Construction totaled nearly 5.5 million square meters, just 100,000 square meters less than the previous quarter. Still, these figures represent robust volumes, seen in some markets at historic highs, such as Guadalajara.

During the first quarter of 2025, construction began on 84 new industrial properties, totaling 1.2 million m², a figure similar to the demand for space registered during the same period. The markets with the highest activity in new warehouses were Monterrey with a total of 17, followed by Saltillo with 12, and Querétaro with 11. The new properties are generally large, and the majority of these are speculative spaces.

Regarding rental prices, they continued to be under upward pressure in most markets during the quarter, closing the first quarter of 2025 at a national average price of $7.00 USD/m²/month. Despite increased supply, rental prices have increased as a result of higher construction costs and the properties' more sophisticated construction specifications, making them more efficient and sustainable. 

In the last year, the markets that have experienced the most pronounced price increases are Saltillo with 20%, followed by Mexico City with 17%, Guadalajara with 15%, and Querétaro and Aguascalientes with 11%. In contrast, the market that has grown the slowest is Ciudad Juárez with only 1%.

Although the issue of tariffs imposed by the United States government has impacted Mexico's industrial real estate market, it appears that uncertainty will diminish in the coming months, as safe conditions are being established, especially for Mexico. This could create a more secure environment for industrial investors, as well as for international companies seeking to enter Mexican soil. Given this fact, we can foresee better numbers in the coming quarters than those shown in this one.