Much of the future investing targeting nearshoring, particularly from institutional real estate investors, will occur on the American side of the border. These investments will often be more suitable for American institutional investors and tap into much larger pools of capital than what is available for investments into Mexico.
Texas real estate is experiencing a significant upswing that is being fueled in part by Mexico's rise to the top spot as the United States' leading trade partner. Towns like Laredo, nestled in Texas on the border with Mexico, are booming thanks in large part to the increased trade from the nearshoring trend and Mexico's industrial boom.
According to Adrian Ponsen, a director at CoStar, “Laredo is definitely bucking the slowdown in the industrial market that’s happening in the rest of the U.S. Laredo is really in a situation where retailers and logistics companies are gobbling up space about as fast as developers can build it there.”
Laredo's industrial property supply has surged by 20% in the past five years, double the U.S. average, according to CoStar data. Companies seeking cost-effective and geographically advantageous manufacturing solutions are driving the demand for Texas industrial spaces. Many of the companies coming to Mexico are Chinese companies looking to benefit from USMCA tax advantages and to accommodate large clients in America who may be asking some tough questions from China-based suppliers. Nearshoring's continuation depends on Chinese manufacturers relocating, and Washington DC not being threatened by the growing presence of its economic adversary building an empire in Mexico.
"There’s going to be a dramatic amount of industrial space being built in this community,” according to Rolando Ortiz, COO at real estate firm Killam Development. “And it’s all spurred from this nearshoring concept and supply chain reliability.”
Laredo has gained a significant number of new jobs during its industrial boom. All of the positive news from the border town has many knock-on effects on other real estate sectors, not just industrial. Nippon Express, a Japanese logistics giant, is expanding in Laredo, as is Samsung. Samsung is also building a $17 billion semiconductor manufacturing plant in Taylor, a town northeast of Austin, with construction beginning in June of 2023.
Investing in a border town, rather than in Mexico directly, means cheaper and freer flowing capital due to lower risks. Institutional real estate investors can make larger investments in cases when nearshoring investing involves properties located in America, and gain the diversification benefits without taking on so much risk. Properties located next to key entry points are prime for large-scale investments and the key crossing points will receive the bulk of future investments.
