Industrial Markets in Mexico Q4 2013

Industrial Markets in Mexico Q4 2013

Content National Economic Overview Overall Mexico Industrial Real Estate Market Overview & Statistics Bajío Region Statistics Central Region Statistics North Region Statistics Industrial Property Clock Something to watch and outlook 2

National Economic Overview 3

Regions of Industrial Real Estate in Mexico 4

National Economic Overview Q4 2013 Mexico s economy suffered a slowdown during 2013 s second semester, the year begun with a growth forecast for the Gross Domestic Product of least at 3.4%, but closed at 1.6% For 2014 the GDP forecast is 3.5%, hoping that this year the Federal Government will increase expenses and investments to activate the economy The recently approved Federal Energy Reform is expected to consolidate existing business and generate new platforms Mexico Central Bank reserves closed at 176 Billion US setting a historical record 5

National Economic Overview Q4 2013 Exchange rate was stable closing at 13.08 pesos per dollar compared to13.14 pesos per dollar from October 1, 2013 Annual inflation for 2013 was 3.97% and the forecast for 2014 is 3.0% - Mexico s Central Bank forecast is based on the recently approved Federal Tax Reform The unemployment rate in Mexico was 5.2% as of December 2013; this rate has been almost the same in the last 3 semesters Trading grew more than 2.5%, closing at 761.5 billion US where exports were 380.2 US Billion 6

Overall Mexico Industrial Real Estate Market Overview & Statistics 7

Overall Mexico Industrial Real Estate Market Overview At the end of 2013, Mexico s Industrial Market closed with good news for three of its Regions The Central Region keeps being propelled by third party logistics companies that grow their business and footprint in Mexico City s surroundings. Toluca and Puebla grew mainly because of the car manufacturing demand for space The Bajío Region has consolidated with new industrial parks related not only to the new car manufacturing plants, but also for new investments related to aerospace, food and personal consumer new plants and expansion of the existing ones Especially Aguascalientes City has received a number of investors for new industrial parks In the North Region, Tijuana has been occupying vacant space; Monterrey s submarkets reported positive absorption and Ciudad Juárez is on its way to recovering from low rents and high vacancy 8

Industrial Real Estate Market Statistics Q4 2013 CITY Stock Available Net Absorption Vacancy Lease Price Growth New Deliveries USD / m2 / (m2) (m2) (m2) % month % (m2) TOTAL MEXICO 50,545,153 3,086,742 2,142,787 4.2% 4.25 3.2% 1,361,922 Aguascalientes 467,557 13,092 16,692 2.8% 3.31 0.00% 0 Guadalajara 2,126,844 59,552 102,069 2.8% 4.55 1.02% 21,506 Guanajuato 1,759,143 52,774 140,565 3.0% 4.22 16.04% 282,086 Querétaro 2,237,615 51,465 133,742 2.3% 4.38 3.61% 80,834 San Luís Potosí 2,057,886 61,737 160,750 3.0% 4.38 7.99% 164,452 Bajío Markets 8,649,045 238,619 553,819 2.8% 4.17 5.73% 548,878 Mexico City 6,194,171 167,243 140,925 2.7% 5.54 1.87% 115,912 Puebla 1,216,000 13,376 0 1.1% 4.06 0.00% 0 Toluca 2,872,872 34,474 101,619 1.2% 4.55 2.90% 83,429 Central Markets 10,283,043 215,093 242,544 1.7% 4.72 1.59% 199,341 Chihuahua 1,579,572 72,009 14,102 4.6% 3.59 3.15% 49,830 Ciudad Juárez 5,691,824 638,144 291,578 11.2% 3.77 0.05% 2,707 Matamoros 1,636,108 131,759 50,111 8.1% 3.77 0.73% 11,984 Mexicali 1,620,043 202,505 25,084 12.5% 4.20 N/A N/A Monterrey 9,097,691 665,949 558,457 7.3% 4.09 2.19% 199,474 Nogales 1,011,495 40,460 5,574 4.0% 3.62 0.92% 9,290 Nuevo Laredo 805,005 103,644 15,243 12.9% 3.23 0.00% 0 Reynosa 2,729,288 235,695 81,273 8.6% 3.73 0.58% 15,927 Saltillo - Ramos A. 2,114,178 91,812 277,131 4.3% 4.09 10.17% 215,007 Tijuana 5,327,862 451,051 27,871 8.5% 4.52 2.05% 109,483 North Markets 31,613,065 2,633,030 1,346,424 8.2% 3.86 2.21% 613,703 9 ** Mexicali Industrial Market stock was adjusted this quarter. Stock in this report shows only Class A buildings.

Mexico s Market Statistics Stock (m2) 10

Mexico s Market Statistics Average Rent (USD / m2 / month) 11

Mexico s Market Statistics Vacancy rate (%) 12

Mexico s Market Statistics Absorption (m2) 13

Bajío Region Statistics 14

Mexico s Market Statistics Bajío Region Guanajuato Market keeps growing at the existing and new industrial parks Almost 550,000 m 2 (5 920,000 sf) of new industrial space were built in several facilities at Aguascalientes, Guadalajara, Guanajuato, Querétaro and San Luís Potosí Vacancy rate has not varied much and is around 3%, encouraging the governments from different states as well as developers to secure and develop new industrial parks Querétaro and Aguascalientes recently inaugurated three new developments for the Car Manufacturing and Aerospace industries 15

Mexico s Market Statistics Bajío Region Stock (m2) 16

Mexico s Market Statistics Bajío Region Average Rent (USD / m2 / month) 17

Mexico s Market Statistics Bajío Region Vacancy rate (%) 18

Mexico s Market Statistics Bajío Region Absorption (m2) 19

Central Region Statistics 20

Mexico s Market Statistics Central Region Rents in Mexico City are at pre-crisis levels NNN US $ 6.20 /sf / yr (NNN US $ 5.50 /m 2 / month) pressured by lack of developable land and low vacancy (less than 2%) Big Box requirements keep driving this market. Development has been very active at the Tepotzotlán toll booth surroundings. Puebla Market keeps feeling pressure because of the lack of development and demand for space Toluca Market is healthy, rents went up compared to last year Central Region markets built 254,000 m 2 ( 2 734,000 sf ) of new industrial space 21

Mexico s Market Statistics Central Region Stock (m2) 22

Mexico s Market Statistics Central Region Average Rent (USD / m2 / month) 23

Mexico s Market Statistics Central Region Vacancy rate (%) 24

Mexico s Market Statistics Central Region Absorption (m2) 25

North Region Statistics 26

Mexico s Market Statistics North Region The Northeast markets have had a considerable activity rise The Monterrey Metropolitan area registered a total absorption of 6M sf due to the large on-going projects such as Mondelez with 1.4M sf - This market has important BTS projects on sale that have a significant impact in the market s absorption rate - Total building stock is at a low rate, encouraging developers to evaluate the possibility of new building construction and causing lease rates to register some adjustments Ciudad Juárez is also a market that has seen recent activity - Vacancy rates are close to single digits; numbers we have not seen since 2009-2010. Lease rates begin to rise and buildings with 180,000 sf or more are on demand The Saltillo/Ramos Arizpe/Derramadero market continues to grow as it has been doing for the last few years due to major automotive projects, this market maintains conservative vacancy rates, allowing lease rates to remain in favorable conditions for landlord. 27

Mexico s Market Statistics North Region However,other markets such as those in Tamaulipas (Reynosa, Matamoros and Nuevo Laredo), are struggling to maintain constant activity - Reynosa s recorded activity is mainly from expansions or relocations by companies that are already in the area - Nuevo Laredo continues to be a key logistics hub, but activity seems just moderate with no recent important projects In general, the Northeastern Markets reflect important activity and we expect good forecast for 2014 In the Northwestern Markets, Tijuana is gaining traction with expansions and lease renewals, vacancy has dropped from 11% in 2012 to 8.5% in 4Q 2013. Institutional sales of real estate have been active in this market Mexicali and Nogales are in their way to recoup market rents 28

Mexico s Market Statistics North Region Stock (m2) 29

Mexico s Market Statistics North Region Average Rent (USD / m2 / month) 30

Mexico s Market Statistics North Region Vacancy rate (%) 31

Mexico s Market Statistics North Region Absorption (m2) 32

Industrial Property Clock 33

2013 Q4 Mexico Industrial Property Clock Mexico City Guanajuato Guadalajara San Luís Potosí Puebla, Toluca Peaking Market Falling Market Querétaro Aguascalientes Rising Market Bottoming Market Chihuahua Monterrey, Tijuana Nuevo Laredo Saltillo / Ramos A. / Derramadero Matamoros Juarez Mexicali Nogales v Reynosa

Reading the Property Clock Peaking Markets Central Region keeps growing with logistics and distribution Mexico City s industrial market grows its footprint annually - Rents have grown up to pre-crisis levels Puebla Market is very tight; land is scarce and vacancy is at a low Toluca Market has been growing as an alternative to Mexico City, it is also attracting local businesses 35

Reading the Property Clock Peaking Markets Guanajuato is growing in several submarkets like Silao and Celaya thanks to the car manufacturing and the food related businesses Guadalajara keeps occupying space and growing at El Salto and South Periférico San Luis Potosí keeps attracting new industries related to consumer goods - The car manufacturing industry is taking advantage of the city s communications and infrastructure 36

Reading the Property Clock Rising Markets Querétaro has been active inaugurating new developments near the airport both for the aerospace business and for the car manufacturing business. These industries have taken advantage of the local educated labor Aguascalientes seems to be the new frontier for developers: at least three major national developers have inaugurated parks in this market, one of them is Nissan s supplier park Tijuana continues its path towards quickly becoming a speculative development marketplace once again. It is the first border city to regain this business climate, with Mexicali active with user based development and expansions 37

Reading the Property Clock Rising Markets The smallest of the Northwest Border region cities, Nogales, is also enjoying the expansion of Kimberly Clark (KCI) leasing vacant space within the Nuevo Nogales Industrial Park Ciudad Juárez keeps lowering the existing vacancy rate. Possibly there will be an increased absorption for 2014 from both corporate transitions and institutional investment Saltillo Ramos Arizpe industrial market continues to be active, it grew more than 2 MM sf during 2013 Monterrey submarkets have been improving, especially Apodaca and Santa Catarina, where land prices and rents are growing 38

Reading the Property Clock Bottoming Markets Nuevo Laredo, Reynosa and Matamoros have seen a slow down in their activities, however, tenants have stayed at their buildings There are no new developments in the horizon and vacancy rates are around 10% 39

Something to watch and outlook 40

Something to watch The Federal Energy Reform can accelerate the creation of new businesses and new platforms at non-conventional submarkets for industrial real estate Income Producing Industrial Portfolios are in the market for sale; their locations and quality will provide the market with several prices Last year the uncertainty caused by the approval of the Federal Tax Reform delayed business decisions that should take place in 2014 Outlook Northern Region markets will keep gaining traction. Overall vacancy of 8.2% is better than last year s Mexican REITs (FIBRAS) and Mexican Pension Funds, CKD s (Certificados de Capital de Desarrollo), will compete for the stabilized industrial real estate that will appear in the market Sellers will take advantage of this appetite producing new assets 41

Real value in a changing world Monte Pelvoux 111 Piso 5 Lomas de Chapultepec 11000 México, DF www.joneslanglasalle.com.mx Gerardo Ramírez Barba National Director +52 55 5980 8003 geardo.ramirez@am.jll.com