Challenges U.S. Manufacturers Face Right Now When Moving Operations to Mexico11.29.22
Unprecedented challenges have plagued the economy over the past few years. Pandemic restrictions and the Great Resignation have delayed and derailed supply chains and manufacturing operations. However, headed into 2023, businesses are hopeful for a resurgence. With many U.S. manufacturers setting their sights on Mexico, they are eager to operate closer to home while still maintaining a cost-effective business model.
It’s this surge of interest that has also created some additional challenges that all manufacturers interested in Mexico face. Currently, Mexico’s biggest challenge will be the availability of industrial real estate for new companies. Plenty of companies have continued expanding their operations, even during the pandemic. As a result, most of Mexico’s industrial cities are experiencing very low industrial vacancy rates due to this demand. Right now the main industrial hubs report less than a 1% vacancy rate with higher industrial rents and competitive building leases now more than ever.
Availability of Industrial Space in Mexico: Then and Now
Before 2020, foreign manufacturers would likely have anywhere from four to eight different building options to evaluate in the same city. Now even if land is available, it takes approximately 8 to 12 months to obtain a facility since usually the facility needs to be constructed as a built-to-suit project. This means companies will lease a building before it’s fully completed and will have to wait for the construction to be ready. This can cause a significant delay to a company’s growth plan and can result in a loss of revenue and market share.
Furthermore, securing a space requires putting down a deposit. Yet, the amount of competition trying to lease the same space makes this problematic, especially if the manufacturer isn’t ready to make a decision. With the building shortage in most of the industrial hubs in Mexico, it is extremely important to collaborate with a local firm that has access to the local real estate market and can help you find the right building and developer for your project.
Once a building has been sourced, it’s best to claim it before it’s no longer available, but in order to do this you need to be ready to commit to a property. The process can quickly become frustrating and overwhelming, which is why it’s beneficial to have the help of a Mexico shelter services company.
How Shelter Services Ease Manufacturing Challenges
Mexico shelter services start with site selection. Site selection involves a cost analysis of lease rates, utilities, permitting, and other details necessary to operate. The process of narrowing down available buildings is performed separately as options change rapidly depending on the demand at any given time.
Additionally, manufacturers operating under a Mexico shelter company can use the permits and certifications already in place, which saves on time and costs. Shelter services also include recruiting industrial workers with the specific skills necessary for the project. This serves as yet another benefit since U.S. manufacturers are currently facing a talent shortage.
Challenges are nothing new in the world of manufacturing, but a shelter can help ease the transition for U.S. and other foreign companies as they set up new operations. To learn more about how our experts can provide customized solutions to your manufacturing challenges, contact IVEMSA today.