Identifying Industrial Real Estate Cost Savings When Manufacturing in Mexico

Article Summary: As tariffs continue to rise, manufacturers are looking for ways to save on costs. With limited industrial labor and real estate being a big part of operating expenses, nearshoring manufacturing could be beneficial to secure real estate space at a lower rate and continues to be a strategic contributing factor to the success of U.S. manufacturers’ growth.

There are two key areas where manufacturers can save big on costs when manufacturing in Mexico. The first is labor, and the second is real estate.

Depending on where a company is positioned in the U.S., there can be significant cost savings when operating close to the U.S./Mexico border in Baja California. In some cases, manufacturers can save half a million dollars in rent per year.

The close proximity to the U.S. audience, coupled with the cost savings on prime industrial real estate, is reason enough for manufacturers to consider the advantages of what nearshoring manufacturing offers.

Let’s take a clearer look at a side-by-side comparison of cost reductions and opportunities of real estate in the U.S. versus Mexico, and the potential there is to save up to 40-50% on an industrial lease on a Class A Building.

Based on the reported asking price for rent figures in each market, there’s a potential maximum savings of 58%.

There are also similar real estate savings when looking at other manufacturing hubs in Mexico, as well, including the Monterrey area, Hermosillo, Chihuahua, and Central Mexico, commonly known as “El Bajio” region, which are optimal locations for manufacturers with a central or eastern target audience in the U.S.

Contact IVEMSA to get projected expenses for the area(s) in Mexico you’re evaluating.

Identifying Viable Building Options with a Shelter Company

All cost-saving estimates are based on Class A facilities. While the pricing is more cost-effective, it’s still a competitive market.

It’s likely any viable location in Mexico will have a cost-savings impact for your operation, and a chosen facility will follow the same U.S. building codes and be of similar quality to what you would expect from a new building in the U.S.

Partnering with a Mexico shelter company provides the local insight and network necessary to source buildings to fit specific project needs and goals. Through a site selection process, manufacturers receive a building comparison of chosen areas that details costs, transportation availability, access to talent, and regional advantages.

Similar to the U.S., the typical building lease is five years, and because of the proximity, there’s not the same assumption of risk of setting up in Mexico versus another part of the world.

An alternative to launching production under the shelter model is to establish a standalone entity. While this option is more costly and extends the timeline by several months, certain shelter services can still be applied as needed.

This alternative is especially popular when a company is undeterred by a longer setup process or the liabilities of having a legal presence in Mexico. Under this model, a company can also partner up with a shelter and get a full scope of services for their Mexican corporation, as well as minimize their risk in selected departments, including HR, accounting, payroll, and trade compliance (import/export), to align with Mexico´s best business practices.

Every project has specific requirements and challenges. IVEMSA is here to evaluate cost savings to help make the transition to Mexico manufacturing seamless and set up for long-term success.

Speak with IVEMSA about where you can save costs.