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Report: Border Industrial Warrants Investor Attention

Cross-border manufacturing isn’t anything new. Maquiladoras – factory and manufacturing plants – have been operating close to the U.S.-Mexican border for decades. A newer trend, however, is the increase of nearshoring logistic real estate that’s coming in the wake of global supply chain reorganizations.

Marcus & Millichap’s special report on border-proximate industrial indicated that an increase in cross-border trading by rail and truck is fostering a demand for—and development of—warehouse and distribution space at border entry points in the United States. These are located in Texas, Arizona, Southern California and Michigan. Meanwhile, across the border in Neuvo Leon, Mexico, Whirlpool, Hisense, Bosch and Danfoss either opened or broke ground on new factories in the area.

But in the United States, “many of these markets, however, have smaller industrial stocks, suggesting demand will spill over into larger metros that are farther from the border, but have greater regional connectivity,” the report said.

The report also noted that nearly 60% of investors plan to remain active in the first half of 2023, complete with “large volumes of capital waiting to be deployed.” Industrial assets, with their low vacancy rates and record asking rents, are a favored investment type. These fundamentals, combined with “an increase in cross-border trading, suggest border-proximate listings may appeal to a larger pool of active buyers,” the report said.

And those investors could benefit from ideal pricing and 7%-plus cap rates. The Marcus & Millichap report noted that El Paso and Corpus Christi, TX are likely to stand out as targeted investment areas. The latter is worth contemplating because it has the closest domestic seaport to Neuvo Leon, and the former because its “stock of logistics space is larger than nearby markets.”

And its not only border-proximate industrial that could be targeted by investors. An anticipated increase in truck crossings could impact other sectors. Restaurants, QSRs and net-lease listings close to international borders and nearby thoroughfares could receive buyer attention.

“Additionally, more trucks entering and existing the U.S. could boost demand for budget-friendly lodging in border towns, stoking buyer interest for economy and midscale assets,” the report said.


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About Amy Wolff Sorter

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