Industrial Insights - July 2023
Nearshoring's Impact on Mexican Logistics Real Estate
Prologis research highlights nearshoring as a major demand driver. Key findings include:
- Investment scale: Each $1 billion invested in Mexican auto factories can spur 5-10 million square feet of local logistics demand - Strong fundamentals: Logistics space demand doubled in 2022 compared to 2019, pushing vacancy to approximately 1% and driving rents up 16% - Competitive advantages: Location, free trade agreements, and labor costs make Mexico increasingly attractive for supply chain repositioning - Long-term trajectory: This represents "the first wave of investment," expected to unfold over decades as infrastructure and supplier networks develop
Inland Empire Market Trends
The Inland Empire maintains strength as the West Coast's distribution hub. Q1 2023 data shows 36 million square feet under construction and nearly 10 million completed. Average asking rates surged to $1.63 NNN—a 28% yearly increase. However, consumer demand softening signals potential market cooling ahead.
Orange County Market Trends
Rent growth moderated to 10% in Q1 2023, down from 2022's 13.6% peak. New restrictions in Irvine requiring conditional use permits for properties over 100,000 square feet complicate leasing processes, adding $3,000-$5,000 and approximately 90 days to approval timelines.
Los Angeles Area Market Trends
Move-outs in spaces exceeding 10,000 square feet doubled move-ins during Q1 2023, with larger spaces showing even steeper departures. Recession concerns have dampened port-related demand. Tenants and landlords are engaged in a "wait-and-see" dynamic—tenants deferring decisions hoping for rent declines while landlords accelerate lease renewals.