Risk of real estate bubble in Monterrey due to speculation in industrial warehouses

Foto: Especial.

Some real estate purchase and sale transactions exceeded the barrier of 1,000 dollars per m2 in the Monterrey city during the first quarter of 2024

Although the dynamism of the industrial warehouse sector in Monterrey, Nuevo León responds to a strong demand for space by companies attracted by the reconfiguration of supply chains (nearshoring), specialists warn that speculation in the market could burst a real estate bubble.

In the last decade, the average sales price per square meter (m2) of industrial warehouses in the Monterrey capital increased between 15% and 20%, according to the real estate data platform SiiLA.

Thus, in the first quarter of 2024, some purchase and sale transactions of this type of property in the Monterrey capital exceeded the barrier of 1,000 dollars per m2.

Not all operations have reached this value; in fact, prices range between 500 and 700 dollars per m2. However, Alejandro Delgado, regional manager of SiiLA Mexico, stressed that the value of warehouses, both in Monterrey and in other markets, has grown significantly.

“It is important to be cautious when making these investments, since a ‘bubble’ could be created due to excessive speculation about the growth in rents and capital gains in the coming years,” said the expert.

Since 2020, the industrial real estate sector in Monterrey has not stopped, as there is a constant interest from developers to take advantage of nearshoring.

In the first five months of this year alone, more than 925,000 m2 of new constructions were reported started, divided into more than 40 industrial warehouses, according to a report from the Solili platform.

“Projections indicate that this trend will continue to increase for the rest of the year, which will not only attract new investments, but will also lead to the start of numerous projects in the northern market, consolidating Monterrey as a key market in Mexico,” the analysis reads.

Participation of Fibras

The role of Real Estate Investment Trusts (Fibras) has been decisive for industrial warehouse transactions. These institutional investors have made million-dollar acquisitions of between three and 60 million dollars per operation in Monterrey, so far in 2024.

The purchase of eight properties (six built and two under construction) in the municipalities of Apodaca, Ciénega de Flores, Escobedo and Guadalupe by Fibra Mty from Nexxus stands out.

On the other hand, Fibra Terrafina acquired an industrial warehouse in Ciénega, it has a GLA of 51,000 m2 and is occupied by DHL.
When analyzing the purchase price by submarket, it is noteworthy that the $1,000 barrier is more common in Apodaca, where average sales prices have exceeded those of other Monterrey submarkets by up to 30% over the past four years, according to SiiLA.

“This indicates that some operations, such as the one carried out by Fibra Mty in Ciénega de Flores, had significantly high prices for market standards,” the platform added.

Source: eleconomista