Alberto Chretin

Mexican Association of Industrial Parks (AMPIP) President
Industrial Developers Focus on Quality and Environment

HOW LARGE IS THE CURRENT MEMBERSHIP OF AMPIP?

The AMPIP is the leader business organization representing the industrial real estate sector in Mexico.

Currently the AMPIP comprises 58 corporate members, from which 40 are private developers, 8 investment funds and 10 state government industrial trusts.

Altogether, AMPIP members hold more than 200 industrial parks located across the country, with more than 2,000 tenants, mainly from industries such as aerospace, auto parts, medical equipment, appliances, chemical-pharmaceutical and processed food, among others. All these tenants generate about 500,000 direct jobs.

WHAT IS THE CONDITION OF MEXICO'S INDUSTRIAL/DISTRIBUTION REAL ESTATE MARKET IN 2009?

The industrial real estate sector in Mexico is directly correlated to the dynamics of the manufacturing industry in the U.S. and to the demand of the American consumers' market. As a result of the U.S. and global economic woes, Mexico's foreign direct investment (FDI) final tally for 2009 will be about 35% lower than 2008's.

In addition, in 2009, industrial developers in Mexico encountered a severe lack of credit to fund their projects.

In spite of these gloomy conditions, for the end of 2009, industrial developers in Mexico began to feel a slow reactivation in new projects, with more traffic of prospects in site selection visits.

WHAT IS THE OUTLOOK FOR THE MARKET IN 2010-2011 AND WHAT MAIN PROBLEMS/CONDITIONS NEED TO BE RESOLVED?

We still have record vacancy levels and therefore, new construction and developments won't probably start until the middle of 2010. However, some of the most affected industrial sectors like the automotive are beginning to show signals of preliminary recovery in the form of new manufacturing initiatives or reactivations.

Although the high expectations most of the AMPIP members have for a recovery within the next months, not all the regions in Mexico are presenting signals of recovery. Cities in the North border of the country are the most affected by the crisis in the U.S. market.

Historically, the Mexican cities close to the U.S. border have been more attractive for FDI manufacturing facilities, because their location facilitates the logistics and proper functioning of the various value chains. This is clear, especially in the automotive industry located in the corridor that goes from Windsor, Ontario in Canada; Michigan, Ohio and Indiana in the U.S., and Mexico.

In the center of Mexico, although we also see important manufacturing operations, there is a boom of distributions centers in regions like the Metropolitan Zone of Mexico City, Toluca, Queretaro and Puebla. The logistics sector is beginning to shop MEXICONOW Staff Interview around for additional space central part of Mexico. The two sectors that will be a key factor for the following months: appliances and aerospace, so we have to be prepared as a country in order to be ready in terms of availability of skilled labor force, adequate industrial spaces, incentives and infrastructure.

The position of the AMPIP is positive that the FDI will continue to land in Mexico, since the country has gained more competitiveness in terms of integral manufacturing costs. According to the Alix Partners Manufacturing Cost Index which includes factors such as raw materials, hourly and salaried personnel, overhead, exchange rate, freight, duties and inventory, Mexico has surpassed both China and India in terms of overall cost competitiveness.

WHAT IS NEW AND WHAT ARE WE LACKING IN MEXICO IN TERMS OF FEDERAL LEGISLATION AS IT RELATES TO THE REAL ESTATE INDUSTRIAL MARKET?

Although there is optimism, some AMPIP members think that the Mexican government and the Congress still have a lot of homework to accomplish in relation to the country's competitiveness agenda. The fiscal, labor and educational reforms are urgent. We cannot continue to survive in the global market with systems that does not correspond to the current reality.

There were maybe ideal when Mexico was a closed market and there was no competition domestically, but today we have to modernize in different areas so as to be able to compete with other countries, such as the BRIC (Brazil, Russia, India and China), which have registered impressive growth rates during the pasts 10 years.

HOW ARE MEXICAN INDUSTRIAL REAL ESTATE DEVELOPERS CONTRIBUTING TO IMPROVE MEXICO'S OVERALL COMPETITIVENESS TO ATTRACT FOREIGN INVESTMENT?

AMPIP members are conscious about the necessity to adapt their business model to the new global scenarios. During their creation in the sixties, industrial parks have been an important determinant of economic development in Mexico. Under the maquiladora program, twin plants from the U.S. required land with permits to operate their facilities in the Mexican side and this was a window of opportunity to developers located mainly along the border.

Later in the nineties, with the opening of the market and the NAFTA, the industrial real estate market faced new demand conditions where the buildings, not the land, were the new key factor for the investors' decision.

Again, developers adapted successfully their business models to satisfy the market requirements.

WHAT ARE THE MAIN PLANS/PROGRAMS FOR AMPIP IN 2010?

The new challenge for industrial developers is now quality and environment.

The sustainability of industrial buildings and parks is becoming a new factor influencing the decision making of tenants. That is why the AMPIP promotes actively the standard NMX-046-2005 which contains general criteria of infrastructure quality to provide certainty to potential investors.

For 2010, one of the objectives for the AMPIP is to reinforce the alliance with the PROFEPA (Mexico's environmental protection federal administration) to promote the new "Clean Industrial Parks" certification, which verifies the accomplishment of environmental regulations from tenants and from the park's administration.

We will also be working more closely with our government in the general strategy to promote Mexico as an attractive place for foreign investors, specifically, emphasizing the advantages of industrial parks as a "plug & play" option to facilitate the establishment of new business ventures in Mexico.