How the U.S. election might impact factories in Mexico

Mexico’s industrial real-estate market has exploded since the North American Free Trade Agreement took effect in 1994.
Mexico’s industrial real-estate market has exploded since the North American Free Trade Agreement took effect in 1994.

By Robbie Whelan and Erica E. Phillips / Wall Street Journal

The U.S. presidential election is still days away but the impact of the campaign and its outsized focus on Mexico already are being felt in the market for warehouses and factories in border towns like Tijuana, Juarez, Monterrey and Saltillo.

Leasing of industrial space along Mexico’s northern border has slowed sharply as uncertainty has grown over how the election’s outcome—particularly a victory by Republican candidate Donald Trump—would affect demand.

Mexico’s industrial real-estate market has exploded since the North American Free Trade Agreement took effect in 1994 and created a unified market between Canada, the U.S. and Mexico, making it easier for manufacturers to take advantage of cheap labor, low costs and less-stringent business regulations south of the border. In the past decade alone, it has nearly tripled to more than 710 million square feet of space.

But the election of Trump—who has called for the U.S. to pull out of NAFTA—could have a chilling effect on the market in the short term, experts say.

If NAFTA were done away with, “on the Mexican side of the border a lot of the facilities will go vacant, rents per square foot will drop substantially,” said Tom Fullerton, an economics professor at the University of Texas at El Paso. “It’s not hard to imagine about a 30% to 40% vacancy rate collectively on both sides of the border.”

http://www.wsj.com/articles/how-u-s-election-may-impact-industrial-leasing-in-mexico-1478014248

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