The pandemic has propelled the digital channel for brands and shops; 2 out of 10 businesses has experienced an average 300% growth in online sales and, for 2021, 19% of businesses are expecting ecommerce to account for 30% of their total sales, informs the Mexican Association of Online Sales in their 'Report 4.0: Covid-19 Impact in Online Sales in Mexico', dated 8 September 2020.

Moreover, it points out that retail is the sixth most visited category in Mexico and its mobile audience grew the most during the past year.

The three retail subcategories that have presented the acutest development throughout this year are health, department stores and food/supermarkets/pantry; all three cases, increased their audience by 50% with respect to last year.

Retail ecommerce sites are the ones which have mostly thrusted the category: Mercado Libre, Amazon and Coppel occupied the first three places in the retail ranking for May 2020, mentions the report from the Association of Online Sales.

Ecommerce specialists, such as Mr. Jorge Fernández-Gallardo, Ecomsur CEO for North Latin America, reveals that the most sought properties in industrial real estate are warehouses for ecommerce operations. “We work with local partners in Mexico, Colombia and Argentina, and choose the option which can offer the highest capacity in square meters and operation logistics for pick and pack and order fulfillment. We have made several requests to increase the number of square meters and capacity to each of our partners.”

Industrial real estate developers are talking a lot about the challenges that lay ahead for the sector in terms of fulfilling the ecommerce demands in Mexico, considering the demand for storage and distribution spaces has increased so dramatically and, not only that, strategic location, connectivity and capacity also play a part in the equation.

The Covid-19 pandemic and the lockdown in Mexico have forced ecommerce businesses to improve their delivery systems to make them more efficient. The most critical part of the process is the final stretch, from the last distribution point to the hands of the consumer, best known as the last mile. During the past few months, last mile distribution centers have sprung up in Mexico’s major cities; however, there are many challenges ahead, one of them being space availability.

Consumers change, rules change too. The most successful businesses are those which offer the best customer experience and deliver their products and services in the least possible time. This represents a challenge not only for ecommerce, but also for logistics and industrial real estate.

“Two years ago, we started seeing ecommerce businesses come into Mexico, specifically Mercado Libre and Amazon, which are the main players in the continent. The arrival of the Covid-19 in March only accelerated the processes that had already started and online shopping simply exploded because of the lockdown. Some companies already had in place strong processes to face the situation, but others had to start from scratch to be able to continue serving their customers online, and it is precisely because of these incoming players that we have witnessed a distribution center boom in Mexico City and its surrounding areas, which is the most densely populated area in the country with 25 million people, although other urban centers such as Guadalajara and Monterrey have also experienced a surge in ecommerce. The companies which were unable to shift to ecommerce have started to rent their factory halls and many others have opted for Third Party Logistics (3PL) or companies which offer logistics services and already had distribution centers and therefore could immediately start handling orders. This is how the storage, distribution and delivery business have reacted,” declares in an interview Mr. Francisco Muñoz, Senior VP CBRE Industry and Logistics Mexico.

Before Covid-19 supermarkets in Mexico were already offering home delivery service, but undoubtedly the pandemic has accelerated the demand for the service by 200%. Likewise, industrial hall occupation to store goods delivered directly to the final consumer has also increased.

“In the next 24 months, we will see last mile distribution centers spring up in Mexico City in an effort to reduce delivery times. Today, these have gone down to 24-hours, but the expectation is to reduce them even further, to 4 or 5 hours as it happens in the US.”
Mr. Francisco Muñoz, Senior VP CBRE Industry and Logistics Mexico.

Competition among ecommerce companies to attain the fastest delivery has resulted in the creation of different strategies to achieve it, for instance, the opening of last mile distribution centers, which is a challenge in Mexico’s bigger cities.

The last mile stretch -which is the journey from the final distribution center to the hands of the consumer– requires distribution centers located close to where the people who actually purchase the products live. This scenario has stimulated the interest of developers and brokers which are already in search of spaces to set up last mile distribution centers.

“What we are seeing now is the need for smaller storage spaces, but closer to the areas where online consumers live. This also represents an opportunity to identify which are the most requested products or which are the products that can me moved from the master warehouse and sent to the last mile distribution centers and from there to the van or motorcycle for final delivery. The target is to make this process as agile as possible to remain competitive in the ecommerce business,” mentions out Mr. Muñoz.

He adds that the new last mile distribution centers should have a constructed area of up to 75% of the total surface and 25% of the surface for loading docks (as opposed to traditional distribution centers which are 50% constructed area and 50% loading docks). The warehouse building should have two or three stories for different brands, and heights of 5 or 6 meters to allow enough room for the products to be moved swiftly. The surface is estimated to be between 3,000 and 10,000 square meters (as opposed to the 50,000 to 100,000 square meters required for master distribution centers).

“Nowadays we have a very sophisticated and mature pull of developers and investors who are looking into this new format of last mile distribution centers, many of them are the same players as for big industrial hall business. Eventually, we will start to see last mile distribution centers developed in two levels, even three or four levels with distribution models using forklifts. In the end, it can be as creative and efficient as you wish,” points out the Senior VP CBRE Industry and Logistics Mexico.

Before the Covid-19 pandemic, master distribution centers for logistics operators and producers where located in Mexico City Metro Area, the exit to Querétaro and the CTT corridor (Cuautitlán, Tultitlán and Tepotzotlán). The demand changed and to stay competitive and deliver speedily to their customers, they had to seek spaces in the city, in areas such as Vallejo, Mixcoac, Acoxpa and Irrigación.

“For the case of ecommerce businesses interested in setting up last mile distribution centers, finding a space available in major cities like Mexico City, which is densely populated (almost 9,000,000 million people) and with the most online sales, has proven to be an enormous challenge. The area is not very extensive, it is surrounded by mountains, most of the surface is constructed already and land is extremely expensive. It is a city similar to Tokyo or Hong Kong, where spaces are very small and where you have to build upwards,” explains Mr. Francisco Muñoz.

Considering these characteristics, land developers, brokers, land owners, ecommerce businesses, architects and engineers are trying to come up with the best possible solution to set up last mile distribution centers. “We are looking at places which already had commercial use. For example, former car dealers can be a good option to set up a last mile distribution center because they have good spaces to showcase the cars plus the car storage space and the workshop, which is easy to dismantle to set up the distribution center.”

As a conclusion, the development of last mile distribution centers is a trend that will continue to grow in all major cities in Mexico, including Guadalajara and Monterrey, where ecommerce is already flourishing and retailers and department stores are already functional there. “Apart from Monterrey and Guadalajara, there are other cities which are starting to develop a dynamic ecommerce system and work as regional transfer centers, serving up to four markets such as León, Silao, Celaya and San Miguel de Allende in Guanajuato. Puebla, for example, can serve Veracruz and Tlaxcala. In the south and southwest. Mérida, Villahermosa y and Quintana Roo; San Luis Potosí in the center; Tijuana, Culiacán, Hermosillo and Chihuahua up north.”

www.cbre.com.mx

The sudden ecommerce explosion in Mexico, because of the Covid-19 pandemic, acted as a catalyzer which made possible for Estafeta, a Mexican courier company, to grow in three months what it had forecast for a five-year period. Estafeta’s projection is to close 2020 with over 60 million deliveries.

The social distancing caused by the pandemic made it evident for companies that the only way to stay in business was via ecommerce, so many joined the online frenzy, from supermarkets and department stores, to fashion, accessories, technology, automotive, parts, pharmacies and cell phones companies.

Amidst this situation, companies like Estafeta have responded to ecommerce’s demand for logistics and delivery services. This is why their forecast is to close the year with over 60 million deliveries. “We are looking at an almost 50% growth with respect to 2019, year in which we closed with 43 million deliveries. We have witnessed an unprecedented dynamism in ecommerce in Mexico: we have more deliveries, but we are also responsible for keeping our staff and customers safe, with all the health measures in place. Furthermore, Mexicans have started to use ecommerce, and once they try it, they like it and see it as a new way of life. There is no indication that this will change, and we are delighted to have much more work, but the challenge is how to deliver,” comments in an interview Mr. José de los Ríos Granja, Engineering and Infrastructure Manager at Estafeta.

As part of the health measures for staff and customers, Estafeta developed a QR code system which allows receivers to register their signature to avoid physical contact during delivery.

Prior to the pandemic, Estafeta had allocated investment funds for 664 million pesos for transport, infrastructure and technology improvements; however, in the light of the ecommerce explosion, it was decided to increase the investment by 25%. “The current investment amounts to 830 million pesos, which is the largest sum of money ever invested in one single year in the 41 years the company has existed. We are doing it because we realize the importance of our services under the current circumstances and we believe we have to rise to the occasion, we believe in Mexico, and therefore decided to increase our investment by 25%,” declares Mr. De los Ríos Granja.

Likewise, he mentions that they have grown their workforce, only in July Estafeta hired over 1,000 new people. “We have obviously provided training for them, to ensure they can offer the service. We have increased our workforce significantly all over the country.”

The sudden workload increase has forced Estafeta to consider the creation of new operation centers, which is a challenge for the Mexican courier company.

“We require more space to make more deliveries, and not only that, we cannot install an operation center in just any industrial park, our service differentiator is location. Therefore, we require enough space to manage the current and future demand, but close to our customers. This represents a tremendous challenge because it not just about finding or building a warehouse, it has to be in a good location based on current and predicted demand, close to primary roads and of course, it has to be a safe facility for our people,” emphasizes the Engineering and Infrastructure Manager at Estafeta.

He explains that new distribution centers, apart from complying with construction safety standards, must be designed to allow the free flow of packages and vehicles, must include railyard and indoor areas to keep packages momentarily, because Estafeta does not store. “A traditional courier service does not require tall warehouses to install racks as it is a cross operation, where the load comes in, it is unloaded, sorted and out for delivery.”

Estafeta has opened operation centers in most of the country and is currently working alongside real estate developers. Their growth plan will continue during this year and well into 2021 thanks to the positive outlook for the courier services industry.

Estafeta has identified that the highest demand for space for operation centers is in cities such as Puebla, Querétaro, Monterrey, Guadalajara, Villahermosa, Toluca, Mérida and Mexico City, although the growth trend is observed nationwide.

For the specific case of Mexico City, which presents various mobility challenges, Estafeta has sought options in the center, south and east of the City, where demand for courier services has increased. “The south and east zones are mostly residential areas, and the industrial spaces available are practically non-existent or very old. The Iztapalapa area in the east of the City has some old industrial parks, but nothing new has been developed recently, and there is quite a lot of demand in the area. Additionally, traffic in Mexico City is still a painful subject and we have sought for all kinds of options; not long ago, we found a very interesting space, an old car dealer, where it is possible for us to align capabilities with the demand,” he adds.

In response to the demand in Mexico City’s northeast, Estafeta recently opened an operations center in Ecatepec, where there has been a substantial demand for its services.

And, to streamline ecommerce deliveries, Estafeta launched its Pick Up and Delivery Options, which is a network of partner shops where customers can receive their deliveries. “The idea is to give people two options, and make partner shops serve as delivery offices within Estafeta’s distribution networks, and with this, offer 1,500 points of contact nationwide,” declares Mr. José de los Ríos Granja.

“We have witnessed an unprecedented dynamism in ecommerce in México: we have more deliveries, but we are also responsible for keeping our staff and customers safe, with all the health measures in place. Furthermore, Mexicans have started to use ecommerce, and once they try it, they like it and see it as a new way of life.”
Mr. José de los Ríos Granja, Engineering
and Infrastructure Manager at Estafeta.

One of the main trends that has stirred up industrial real estate this year is the ecommerce boom, which is now requiring up to three times more industrial space than it previously did. It is estimated that by 2025, the United States will require an extra one billion square feet (100 million square meters) just to meet ecommerce’s demand. Mexico does not fall far behind, Mr. Gerardo Ramírez, SIOR Regional Industrial Director at JLL, talks about the way ecommerce is shaping industrial real estate.

In Mexico there are 77 million square meters in Class A factory halls for manufacturing, logistics and other sectors. However, Mr. Gerardo Ramírez, industrial real estate specialist, points out that in the next five years, the United States economy will require the equivalent to all the available industrial square meters in Mexico, just for ecommerce.

“That is the size of ecommerce’s boom in the US, just in terms of industrial estate. And Mexico does not fall far behind, we have Amazon, Mercado Libre, Liverpool, El Palacio de Hierro and Walmart already operating their own delivery systems and simply not coping; logistic spaces are pretty scarce and new spaces are starting to spring up in primary population centers such as Mexico City, León, Puebla and Guadalajara. So, we can definitely argue that ecommerce is stirring up industrial real estate in Mexico,” comments the SIOR Regional Industrial Director at JLL.

In the light of the ecommerce boom together with the companies’ natural expansion requirements, Mr. Ramírez says that JLL is currently working with logistics businesses in Toluca and some other cities in Mexico. “In Estado de Mexico, which is close to Mexico City, it is estimated that approximately 25,000 to 30,000 square meters will be required; in León, Guanajuato, close to 10,000 square meters and in Puebla, between 8,000 and 10,000 square meters. We are actively working with users and logistics businesses to try to find industrial spaces for them, not just for ecommerce, but also to try to fulfill their natural expansion requirements.”

He highlights that the main challenge industrial developers are facing is finding places where there is infrastructure available to meet their clients’ demands. “What happens if a Chinese company wishes to set up in a place where there is no infrastructure? Too much process would be required to obtain it. Nowadays, finding places with available electricity is a challenge, because the state-run electricity company is quite stretched as it is; hence, developers have to make huge investments to build power sub-stations and then obviously pass the cost on to the client.”

However, Mr. Ramírez emphasizes that this situation will allow Mexico to develop in terms of the industrial square meters available today. “According to our research, Mexico has grown at an annual 4% rate, and the forecast is it will continue on that trend, 3 or 4% growth because distribution centers will be required and Asian companies will come to America.”

“There are different clusters in Mexico, the aerospace industry is in Querétaro and Ciudad Juárez; automotive clusters are located in Bajío, Puebla, Tijuana and Chihuahua. Therefore, what they seek is to be located near the great production factories.”
Mr. Gerardo Ramírez, SIOR Regional Industrial Director at JLL.

The companies’ specific needs tilt the balance to decide whether to set up in one city or another. “For instance, if they require road and railway infrastructure, ports, gas and skilled labor, Bajío is definitely their best option but, if they require labor on a gran scale, the border is better,” explains Mr. Gerardo Ramírez.

Moreover, he mentions that companies are also seeking to be close to their suppliers or their Original Equipment Manufacturers (OEMs). “There are different clusters in Mexico, the aerospace industry is in Querétaro and Ciudad Juárez; automotive clusters are located in Bajío, Puebla, Tijuana and Chihuahua. Therefore, what they seek is to be located near the great production factories.”

He also declares that Mexico is attractive to investors because of its more than 40 trade agreements and its connectivity to Asia, Europe and North America, making it a fantastic location to set up a manufacturing plant.

Mr. Ramírez claims Mexico is at the forefront of countries to invest on as it possesses countless advantages for investors. “Our costs are definitely lower, in comparison to the United States, we are 10 times below, although if compared to some countries in Asia, we are above. In terms of technique and skilled labor, Mexican workers have a wealth of experience and knowledge. Furthermore, Mexican culture is restless by definition, and also extremely creative, always looking for alternative ways to do things, and do them better. This is something I notice every time I visit plants in other places, they do things a certain way when another way has already been found in Mexico, perhaps faster or cheaper, because Mexican workers are always looking for ways to improve the process.”

He concludes that JLL is a global service company that has been part of Mexico’s development over the last 25 years. “The company has now more than 1,500 employees and it offers a variety of real estate services including site selection, leasing, construction, valuation and real estate management, all within an excellence context.”

During the lockdown months caused by the Covid-19 pandemic, the ecommerce company Mercado Libre, increased its number of users to more than one million, out of which 100,000 are located in Jalisco, where it will inaugurate its first storage and distribution center in November.

In its 21 years on business, Mercado Libre, the Argentinian company dedicated to online buys, sales and payments, has witnessed how ecommerce has developed slowly in Latin America; however, the pandemic changed things dramatically, particularly in Mexico.

“Undoubtedly, the pandemic brought with it the biggest digital acceleration in history. Through evolution, flexibility and innovation we have managed to create new ecosystems of integrated solutions to potentiate the growth of Mercado Libre and to aid the entrepreneurship ecosystems as well as small businesses, not only through Mercado Libre, but also through Mercado Pago, Mercado Shops and Mercado Envíos, a solutions array to help them make their digitalization easier, faster, less costly and above all, to give their customers a better service. In truth, the Covid-19 context welcomed us with incredibly high growth rates,” reveals in an interview Mr. Javier Dolcert, Delivery Manager at Mercado Libre.

In recent days, Mercado Libre informed that it closed Q2 2020 with over 158 million delivered products, which represents a 124% growth with respect to the same period last year, while the growth rate in Q1 was 97%.

“Ecommerce is here to stay. I am convinced that many of the costumers who bought regularly during this period or bought for the first time, will continue to do so; we delivered at a very difficult time and I am sure people will keep benefiting from the trust we built. Perhaps we could market ourselves as a platform where people can find what they are looking for and therefore will continue to use us. Our new customer baseline increased to 1 million during the pandemic, that is an increase in buyers who had never used us before, a much higher rate than we had ever recorded and, out of these first-timers, the come-back rate is very high,” points out Mr. Dolcert.

In terms of the products which have recorded the highest demand, have two main categories: home and health. “Home is a category that has been historically strong in Mercado Libre and it has grown a lot. Our growth rate is above 200% as people have spent more time at home and therefore have demanded more home products. Health is a smaller category, but the growth rate is almost 900%; the most requested items are face masks, antibacterial gel and thermometers,” he declares.

The Mercado Libre storage and distribution center located in El Salto, Jalisco, will improve delivery times for our users and service in general for our buyers and sellers, apart from creating a more efficient network.”
Mr. Javier Dolcert, Delivery Manager at Mercado Libre.

The pandemic triggered the opening of the first Mercado Libre storage and distribution center in the industrial corridor of El Salto, Jalisco, which will start to operate in November this year.

“The challenges we face in Mercado Libre are to meet our demand, continue to deliver in time and make our logistics network as efficient as possible. In a way, we had already considered the opening of the distribution center in El Salto in our strategic roadmap to meet the demand of Jalisco, Bajío and North Pacific. The pandemic just accelerated the implementation plan, the construction of the industrial hall, the recruitment process and the start of the operation,” says Mr. Dolcert.

Mercado Libre currently operates in Estado de Mexico with two storage and distribution centers; the first one is located at the Industrial Park O'DONNELL in Cuautitlán Izcalli and the second one is at the Prologis Grande Industrial Park in Tepotzotlán, which has the largest industrial hall for ecommerce in Mexico, with a surface of 100,000 square meters.

The ecommerce platform aims to have the best logistic operations in the world as well as top quality standards, therefore it only operates in AAA industrial halls such as O'DONNELL, Prologis and VESTA. “These factory halls attain the highest industrial quality standards, apart from the fact that a hall for an ecommerce company is very different to a storage facility for a regular company. Our operations are designed for huge storage volumes, but we distribute the space in mezzanines, where Mercado Libre representatives have access to take or store products,” explains the Delivery Manager at Mercado Libre.

Containers coming from China loaded with pre-assembled BAIC vehicles continuously arrive into Veracruz Port, and although the Chinese automotive company does not have a manufacturing process as such in Mexico, it is here where they do the final assembling of their vehicles. This year, amidst the health crisis, they have managed to close over 10% of their deals through their app ‘BAIC Huanying’.

Mr. Samuel Echeverría Palma, National Operations Director at BAIC Mexico, confirms that the possibility of BAIC opening a plant in Mexico is real. "Very soon, a new subsidiary will start operating in place of BAIC International. The new subsidiary is called BAIC Mexico, has already been set up and will soon complete its first imports of products and auto parts. One of the main goals of this subsidiary is to set up a manufacturing plant in Mexico.”

He points out that for the investment for a manufacturing plant to come through, there needs to be an increase in the production volume in Mexico; the minimum requirement to justify the investment is to produce 20,000 units a year. “The production volume in 2019 was 2,000 units, this year, we are aiming to have a similar output and for 2021 we expect to get to 4,000 units. We are still a long way away from 20,000 units, however, BAIC Mexico functions as a request center for orders from Central and South America, and considering this I believe it would be very attractive to build up a joint volume for Mexico and these regions to be able reach the 20,000 units milestone.”

He adds that the Chinese brand has had talks with different State Governors to try to reach an agreement. A couple of years ago, the Governors of Sinaloa, San Luis Potosí, Yucatán, Nuevo León and Jalisco visited the BAIC HQ in Beijing in search of avenues for a possible deal.

On the other hand, he emphasizes that BAIC wants Mexico to acquire vehicle fleets for manufacturing for example, and also make the most of the boom in delivery companies such as Rappi, UberEats, Didi Food as well as ecommerce platforms like Amazon, as this represents a huge opportunity for mobility and transport solution companies.

Mr. Víctor Amores, manager at BAIC Mexico, declares that they are also considering the possibility of incursion into the sale of mid and grand scale volume fleets to tackle the existing demand for reasonable products at reasonable prices.

In terms of venturing in to the electric cars market in Mexico, Mr. Echeverría Palma says the company is indeed considering a production and sale program for Mexico. “We expect this to become a reality in Q1 2021. Our aim is to sell an electric vehicle at a fair price, below 200,000 pesos or even 100,000 pesos, and we want to offer financing through leasing options. We are trying to differentiate ourselves through a leasing scheme, but funded directly with resources from BAIC Hong Kong with their subsidiary BAIC Mexico”.

He comments that they have identified fleet intermediary companies as well as industry sectors interested in electric cars. “We had several approaches with construction companies and retailers, however, pitching an electric vehicle is not as simple as pitching a regular vehicle whose tank is filled up at any gas station. We had feasibility and scoping studies done, but in the end, they opted for hybrid vehicles.”

“Difficult times present hurdles and challenges. Automotive companies have had to move to ecommerce as the Covid-19 pandemic continues to spread and in response to social distancing and lockdown measures announced by the governments worldwide.”
Mr. Samuel Echeverría Palma, National Operations Director at BAIC Mexico.

BAIC came to Mexico in 2016 with the concept 'Motor Nation', distribution through the Autos Picacho network and a sales force comprised by 34 ‘embassies’ nationwide. Up until now, it has sold approximately 1,700 units across the country of their models D20, X25, BJ40 and X65.

Mr. Samuel Echeverría Palma explains that they call their sale points ‘embassies' because BAIC vehicles are made up with the best from different parts of the world. “The brand represents sales for approximately two and a half million units, which use systems from different brands, for example, we acquire Saab’s intellectual property. It is key to highlight the concept ‘intellectual property’, as we do not make copies, BAIC purchases Saab’s intellectual property and then develops safety systems, turbo motor systems etc. When we make the combination of different countries, we ultimately want to give our customers an embassy experience, so our customers do not just visit a German dealer or a Japanese dealer, but an Embassy dealer, where they can find the best of the world. Therefore, we call our sales executives ‘ambassadors’.”

To encourage online sales and reduce the impact of health restrictions, the Chinese car brand strengthened its sales and ecommerce strategies through their app 'BAIC Huanying' (available for iOS and Android), which means 'Welcome to BAIC'.

Thanks to the 'BAIC Huanying' app, the brand embassies are able to receive sale or service requests and have managed to close 10% of their deals nationally.

“BAIC is a business that was born in digital platforms and social networks and has always had an ecommerce focus, even before the pandemic. Our customers started choosing their vehicles using tablets, even if they were visiting the showroom, they used the tablets to browse for different versions, colors etc. And it was not until de customer was ready for personal assistance that they requested it by pressing a button on the tablet,” reveals the National Operations Director at BAIC Mexico.

He concludes that businesses at all levels have had to find to new ways to approach the existing markets and obviously one of the channels is ecommerce. “Difficult times present hurdles and challenges. Automotive companies have had to move to ecommerce as the Covid-19 pandemic continues to spread and in response to social distancing and lockdown measures announced by the governments worldwide.”

www.baicintl.com

On the 30th of July 1996, the Mexican Federal Government, through the Transport Department, granted the State Government of Tamaulipas the concession to build, operate, exploit and maintain the Mexican side of the International Nuevo Laredo III Bridge, which is 297.5 meters long and 36.6 meters wide with eight lanes to communicate Nuevo Laredo, Tamaulipas with Laredo, Texas. It is considered a key infrastructure for the most important crossing in the Mexican northern border.

In recent days, Mr. Francisco García Cabeza de Vaca, Governor of Tamaulipas, made a visit to the border town of Nuevo Laredo to supervise the work on the Master Plan for the International Nuevo Laredo III Bridge, which has a 248.8 million pesos investment.

The infrastructure project includes a variable-width highway stretch to accommodate four lanes, starting right on the Bridge (km 0+000) all the way to the El Canelo (km 5+640)–Nuevo Laredo–Piedras Negras interchange, as well as a customs and immigration facilities building.

It is important to mention that there will be 20 additional projects to equip the international border crossing with the necessary infrastructure to make its operation efficient. The works currently under construction include a new administrative building, the sewage and waters systems, the relocation of the gamma ray equipment for exports, the enlargement of the machine room for the IT department, the exit lanes with shock absorbers for export loads and a fifth lane for loading trucks.

The works are focusing at the moment on the enlargement of the fifth lane of the highway to access the bridge eastbound, the water system, the water tank, the sewage system, the pedestrian access booth and the relocation of the gamma ray equipment for exports. Works also contemplate the adaptation of access points and visitor and staff car parks, the installation of a metal safety barrier, garden improvement works and the installation of an automated watering system, the installation of the stage II water system and new offices for the Nuevo Laredo III International Bridge Trust.

The lane enlargement will speed up the flow of loading trucks which usually use this port to go across the border, reducing waiting times, encouraging competitivity and foreign trade.

During his visit, Governor García Cabeza de Vaca also supervised the progress on the water treatment plant and the enlargement of the exit lanes with shock absorbers for export loads as part of the second stage of this project.

The third stage of the project contemplates the installation of entry and exit gates for imports and export respectively, the construction of a new building to store civil protection equipment, the construction of a storm drainage system and the second stage of the enlargement of the fifth exit lane to access the bridge eastbound.

The World Trade Nuevo Laredo III Bridge is the mo st important foreign trade crossing in the Mexico-US border. Under normal operating conditions, it records 14,000 loading trucks crosses daily.

The World Trade Nuevo Laredo III Bridge is the most important foreign trade crossing in the Mexico-US border. Under normal operating conditions, it records 14,000 loading trucks crosses daily.

The World Trade Nuevo
Laredo III Bridge

248.8 million pesos investment.

30 years concession.

30^th July 1996 the Mexican Federal Government, through the Transport Department, granted the State Government of Tamaulipas the concession.

297.5 meters long and 36.6 meters wide with eight lanes.

+20 projects to equip the international border crossing with the necessary infrastructure to make its operation efficient.

40% projects of the current existing commercial trade between Mexico and the United States uses this crossing.

+1 billion dollars is the product of the trade between Mexico and The United States, and they go across the borders of Texas and Tamaulipas, Nuevo Laredo being the largest land customs office in the country.

+12,000 trade operations occur in this border crossing, out of which 5,500 correspond to export vehicles.

Source: Federal Government and Tamaulipas State Government.

www.tamaulipas.gob.mx

Industrial real estate in Mexico has been less hit than commercial real estate during the Covid-19 emergency. In contrast to other segments, it is estimated that its recovery will start in Q3 2020 and industrial stabilization will start to be perceived by Q4 2020, according to Mr. Sergio Mireles Montaño, Founder of Datoz Real Estate Platform.

“We believe that industrial real estate has definitely been less hit than commercial real estate in Mexico. Additionally, we expect its recovery to be speedier in comparison to other industries. However, we have indeed seen temporary halts on certain new projects both for companies in search of industrial land as well as investors building speculative spaces, but fortunately this has not triggered the definite cancellation of grand-scale projects. In fact, we are certain the recovery will commence in Q3 this year and it is possible we see the stabilization of the industrial activity in Q4 2020”, mentions Mr. Sergio Mireles Montaño, Founder of Datoz.

He reveals that construction within the industrial sector, both speculative and build-to-suit buildings, fell by 27% during the first six months of the year in comparison to the same period in 2019. “If we look solely at speculative buildings, which are the spaces investors build to commercialize later, construction data shows the drop is even steeper, 31%. The drop can be attributed to the fact that investors and developers have been extra cautious, but also to the 2-month long government-imposed halt, as the activity was not considered essential.”

He adds that during the second trimester of the year, which coincides with the lockdown months, industrial space rentals fell by 35%. “But, in fact, there is still the possibility that several of the projects that were put off during the first semester, make a reality during the second half of 2020.”

Mr. Mireles Montaño says that although all signs pointed towards an important growth in industrial real estate in terms of construction, investment, new developments and occupancy, the reality is that the pandemic has affected the global economy and Mexico is not the exception. “But in the end, we believe this is something momentary and we hope the industrial real estate boom with continue in the mid-term. It is a highly-attractive market for both foreign and national investors of all kinds. The common trait is that all the financial plans of these companies are long-term.”

In terms of the states which have shown positive results for industrial space construction, there are three specific markets. “One of them is Mexico City and its metropolitan area which includes the industrial corridors located in Estado de Mexico; the other two are the metropolitan areas in Querétaro and Saltillo, Coahuila. These three were the only markets which showed positive variations when comparing the data from the first of 2019 vs. 2020. To complete the top five of industrial activity in Mexico, we ought to also mention Monterrey and Ciudad Juárez,” expresses the Founder of Datoz.

In Mexico, demand for ecommerce industrial spaces comes in two directions: regional logistic centers, which traditionally occupy vast surfaces, particularly those located in central Mexico, close to Mexico City and, last mile distribution centers, which are still quite new and therefore have not yet affected industrial real estate on a grand scale, comments Mr. Sergio Mireles Montaño.

“We have definitely seen a surge in demand for logistic and storage spaces and it is expected that this demand will continue to increase in the mid-term and long-term. Online sales from flagship ecommerce companies such as Amazon and Mercado Libre have experienced a solid growth, and the same applies to online sales for the country’s main retailers. Online sales for supermarket chains and restaurants have also been positive, even for intermediaries which perhaps do not even have their own brand and use digital platforms to sell specialized products. The new needs have propelled industrial real estate in Mexico during the health crisis and therefore logistic operators have increased their demand for spaces around the country,” declares the Founder of Datoz.

Within this dynamic ecommerce context in Mexico, we are only starting to perceive the demand for last mile distribution centers; there are not yet purpose-built last mile distribution centers. For obvious reasons, we believe that in the next 12 to 24 months we will see an increase in demand for spaces close to urban centers, but with fewer square meters,” adds Mr. Mireles Montaño.

This is precisely one of the challenges ecommerce will encounter in the coming months: last mile distribution centers within urban areas. “We think the greatest challenge is the proximity to urban centers that ecommerce requires, specifically the last mile operation. And it is a challenge for a variety of reasons, firstly, the elevated price of land in urban areas; secondly, how to obtain industrial land use permits in neighborhoods that are close to residential, service and commercial areas; and, thirdly, the difficulty of finding sufficiently large pieces of land to host logistic operations, despite the fact that last mile distribution centers require fewer square meters than regional distribution centers,” he explains.

It is worth mentioning that in Mexico City there is a chance to redesign the Vallejo industrial area to open last mile distribution centers, as the area has many industrial assets which are outdated. “It is probably best for investors to look out for industrial spaces that were absorbed by the city. Vallejo becomes very relevant in this context, but the difficulty will rely on finding adequate sites and also the economic side of things because land within the city is more expensive than land in traditional industrial areas in the outskirts,” he adds.

Mr. Mireles Montaño concludes that although storage and logistics are the star sectors and seem to have the brighter future within industrial real estate, there are other industries such as automotive, industrial goods, medical devices, aerospace, appliances, and electronics among others, which have a positive outlook. “Obviously many of these industries have experienced a cautious slowdown, this is only temporary, and the expectation is that they will continue to grow in Mexico, at least in the mid-term.”

Source: AMPIP
*July 2020.

*Guanajuato includes the following cities as sub-markets: Celaya, Irapuato, León, Salamanca, San José Iturbide, San Miguel de Allende and Silao.

*Mexico City includes the following cities as sub-markets: Coacalco, Cuautitlán, Huehuetoca, Zumpango, Iztapalapa, Naucalpan, Tepotzotlán, Tlalnepantla, Tultitlán and Vallejo-Azcapotzalco.

The challenge is that by 2030 all industrial parks in Mexico are smart and sustainable. Considering this, the Mexican Association of Industrial Parks (AMPIP) is working so that all industrial developers in Mexico go beyond the mere sale of real state and instead progress at the same pace as Manufacture 4.0.

The Fourth Industrial Revolution is contributing to the development of a new type of industrial parks known as ‘smart’ which use advanced Industry 4.0 technologies in fields such as communication, information, measuring, control and management to offer users personalized services.

Smart industrial parks use a general internet of things app for their operation which, through sophisticated networks of sensors connected to computers, monitors and generates efficient and immediate responses to flaws in lighting, drainage and movement. Besides, it can resolve occupants’ needs in real time, like speeding up the traffic of cargo transport and people using for example, a recognition software.

One of the most recent cases of grand-scale convergence of sustainability and Industry 4.0 technologies is the Suzhou Industrial Park (SIP), jointly operated by China and Singapore.

Although in Mexico there are still very few industrial parks concerned about modernizing, the AMPIP is working on the digital transformation of a new generation of industrial parks, where technology and sustainability are at the core of infrastructure and services.

Ms. Claudia Ávila Connelly, Executive Director at AMPIP, stresses in an interview that the idea is to take Mexican industrial parks to the next level, beyond the real estate business, where the vision is to have a social and sustainable impact in the community. “Approximately three years ago, at the AMPIP we started realizing the world was changing so dramatically that it was necessary to determine whether industrial parks should go beyond real estate and start thinking about sustainability and technology. This is quite a paradigm shift; we want to encourage the idea that it is not just about business profitability or performance. Nowadays, the value of a business can be measured in terms of social impact, which includes the community and the environment.We want our partners to be aware of issues related to climate change, poverty and innovation and to integrate small and medium-sized businesses. It does sound ambitious, even idealistic, but we believe it is possible, one small step at a time because we see it is the global trend. We see this happening in other countries, so why not do it in Mexico?”.

She explains that the objective is for smart industrial parks to integrate access technology, for example, to energy monitoring sensors, to data generation and access control with face recognition, so that the entry and exit of maintenance crews is swifter and also to improve the perception of foreign investors with virtual tours of the facilities. “A good example is how it is done in Mexico City, where speed cameras use number plates to identify offenders and the fine is sent via internet. We are planning to integrate this kind of technology to the industrial parks, so we have already given a few workshops and have developed a few programs to implement these projects.”

The Executive Director at AMPIP points out that the 2030 goal is in line with the UN Sustainable Development Goals and its aim is that all industrial parks in Mexico are smart and sustainable. “When I say sustainability, I mean bringing in a circular economy to all parks by reusing and reintegrating residues to production systems.”

It is worth mentioning that in 2019 the AMPIP launched ‘Route Map: a new generation of smart and sustainable industrial parks’, a collaborative tool to make a long-term strategy to determine the path to follow as an organization and what are the specific goals for the sector it represents, which is industrial real estate.

It has been some time now since the members of the AMPIP showed an interest not only for the rental price per square meter or the 10,000 square meters Class A Industrial Halls, but also for the actions taken to protect the environment. Some of these companies have their stock prices based on sustainability indexes and therefore shareholders request evidences. “It was then that we decided to create the program ‘Green Industrial Park’, to encourage water-saving measures, for example”, expresses Ms. Claudia Ávila Connelly.

The ‘Green Industrial Park’ program was created by the AMPIP in 2013 to recognize the effort of those industrial parks which take actions to reduce water and energy consumption and pollutants emissions.

The main characteristic of a green industrial park is the existence of a permanent and verifiable effort to improve processes, equipment and systems, achieving a positive impact in natural resources and the protection of the environment.

Moreover, the program is in line with the Environmental Quality Certification that the Environment Protection Agency in Mexico (PROFEPA) grants and it is a first step to foster an eco-friendly culture and it also offer parks a clear path to move towards getting the above-mentioned certification.

M1: Infrastructure developers in the country have a chamber of commerce that represents them thoroughly and encourages connections within and out of the sector.

M2: The sector has a holistic and standardized information system with data on the Mexican industrial park universe and its activities. The system is permanently updated, backs up the sector’s agenda and enables promotion activities.

M3: At least one third of industrial parks in Mexico are smart and can attract users of the Industry 4.0, with top of the line infrastructure and services, according to the national standards.

M4: Every industrial park in Mexico implements measures and best-practices to ensure social welfare, environmental protection and economic growth in line with national and international benchmarks.

Source: ‘Route Map: new generation of smart and sustainable industrial parks, road to 2030.’

According to AMPIP estimates, there is in Mexico an offer of approximately 500 facilities with industrial park characteristics, including 368 which are part of the association (up until July 2020) and comprise a territory reserve of over 105.8 million square meters, 38.3 million square meters of building space and 2.5 million square meters under construction.

Although in each of the 32 states there is at least one industrial park, 54% are located in border states: Baja California, Sonora, Chihuahua, Coahuila, Nuevo León and Tamaulipas, which highlights the importance of geographical proximity to the US and Canada for export companies, according to the ‘Route map: new generation of smart and sustainable industrial parks, road to 2030.’.

In 2014, BMW Group announced the construction of its manufacturing plant in San Luis Potosí. Little over a year ago, on 6 June 2019, the inauguration of the plant took place, which represented an important milestone for BMW’s production strategy as it guaranteed a flexible and efficient production network on an international scale and a balanced distribution of one of its most iconic vehicles: the BMW Series 3.

San Luis Potosí has become an international benchmark: it is the BMW Group HQ in Mexico.

Since BMW Group’s arrival to Mexico in 1994, the company has shown its leadership in the premium automobile industry in the country, not only because of the quality, performance and technological innovation of its vehicles, but also because of the commitment the company has shown to Mexico, which was endorsed in 2019 with the opening of the San Luis Potosí plant.

The potential growth of the Mexican automobile industry, the availability of talent in the region, the presence of a solid and experienced supplier network and the existence of a mature manufacturing industry, were the key reasons which lead BMW Group to invest 1,000 million dollars in the plant, out of which one third has been destined to training programs for personnel.

“At the BMW Group plant in San Luis Potosí, we are ready to export worldwide and, as part of the global BWM production network, we have a flexible manufacturing system, which means we can manufacture sufficient vehicles to meet the market demand in terms of volume, variables and new technologies. We are committed to Mexico, our plant here is key to our operations worldwide as it allows us to increase our competitivity and the company’s possibilities for the future,” comments Mr. Jörg Willimayer, President & CEO, BMW Group, San Luis Potosí Plant.

He adds that the combination of experience and creativity present in a multicultural team has allowed BMW Group to manufacture more than 50,000 BMW Series 3 vehicles for the global market, apart from having successfully implemented the most advanced, efficient and sustainable technologies to launch their production system in record time.

BMW Group San Luis Potosí initiated the manufacturing of the BMW Series 3 in April 2019, starting with the BMW 330i, and now it assembles multiple versions of the BMW Series 3, including the BMW M340i, BMW 320i, BMW 320d and, the recently added model, the BMW 330e, which is the first hybrid vehicle to be produced at the San Luis Potosí plant.

“Mexico is a fantastic platform for the production of vehicles because of its growth potential and availability of skilled labor within the automotive industry. A year after we started operations, we can say we are extremely happy and totally convinced that we chose the right location to set up one of our most innovative and sustainable plants in our production network,” points out Mr. Willimayer.

Moreover, with the purpose of developing local talent and teaching them about new technologies and sustainable production systems, BMW Group launched a series of joint learning programs with universities and local technical schools, including the Dual Program, the Trainee Program and Pro Lead. More than 350 trainees and 440 students have been part of these programs in San Luis Potosí.

The opening of the plant in Villa de Reyes, one of the 58 counties in San Luis Potosí, has contributed to the improvement of roads and communications around the area and has increased the hotel and housing offer, both in areas close to the plant as well as in the state’s capital metro area.

“We decided to build the plant in Villa de Reyes, at the Industrial Park Logistik II, due to a variety of reasons including connections to highway and railway networks; availability of skilled labor; electricity, water and natural gas supply; proximity to existing suppliers and space availability for other suppliers to set up in the area,” declares Mr. Jörg Willimayer.

The San Luis Potosí plant comprises a surface of 300 hectares and approximately one third is occupied with buildings.

Moreover, the plant has been a job creator in the region and has propelled service and component suppliers. According to the San Luis Potosí Department of Economy, 31,000 indirect jobs have been created just within the automotive sector in the state.

Mr. Jörg Willimayer informs that the BMW Group in San Luis Potosí is the first plant in Mexico to be certified as 'Clean Industry', a program from PROFEPA (Department for the Protection of the Environment). “This is a clear indication of our commitment to the environment and our interest to comply with the environmental requirements in Mexico.”

"At the BMW Group plant in San Luis Potosí, we are ready to export worldwide and, as part of the global BWM production network, we have a flexible manufacturing system, which means we can manufacture sufficient vehicles to meet the market demand in terms of volume, variables and new technologies."
Mr. Jörg Willimayer, President & CEO, BMW Group, San Luis Potosí Plant.

Mr. Jörg Willimayer.

BMW Group’s production areas are designed taking into account quality, flexibility, safety and ergonomics, the company is very mindful of spaces. Likewise, changes to the products within the automotive industry require changes to the production system, which trigger a continuous improvement process towards innovation and adaptability.

In this context, it is worth mentioning that the San Luis Potosí plant is the only BMW Group plant in the world which has a Production Control Room, which makes the operation more transparent and efficient in terms of logistics and production control.

The plant also uses a ground-breaking Intelligent Maintenance System with artificial intelligence and prediction applications, which are used in production areas and signify 20% savings in maintenance time.

Based on Industry 4.0 state-of-the-art technologies, the Intelligent Maintenance System is used in all areas and for production control during the painting stage. “Industry 4.0 is used, for example, during the finishing stages at the painting workshop, where our workers use an automated surface finishing inspection system to ensure perfect quality finishing,” mentions Mr. Jörg Willimayer.

The plant has the first paperless production line within the company’s entire Production Network. All the vehicles, sub-assembles and hundreds of tools have radiofrequency identification labels during the whole process. “These labels point out the location of each object and allow BMW Group to monitor and manage the production with a level of transparency that would have been unthinkable in the past. Transparency not only significantly reduces the use of paper, but also increases the efficiency of the production system. In addition to locating components and vehicles, the radiofrequency identification technology (RFID) helps to improve quality and efficiency. RFID technology allows to track a particular piece without visual access; it is a completely automated option vs. traditional scanner systems, and it covers wider ranges than comparable visual systems,” explains the CEO.

He also says that the plant implements solutions based on the experience and best-practices that derive from the BMW Group Global Production Network, such as laser radar measurements for geometric accuracy of the vehicles’ bodywork, ProGlove barcode scanners on workers’ gloves to save time and rotating transport system with variable height which allows workers to easily access the area of the vehicle where they wish to work on.

The plant only uses 30% of the average water used in other plants of the BMW Group production network. In fact, it is the production plant which less water uses per vehicle produced as the plant operates, for the first time, a painting workshop which does not generate any residual water, instead, the necessary water for the painting process is treated and reused.

The first Schneider Electric smart factory in Mexico is located in the State of Nuevo León, in the municipality of Apodaca. It is the company’s second largest factory in North America and it is betting for a digital transformation.

Asmart factory evidences the benefits of the fourth industrial revolution, which means it has comprehensively implemented intelligent technologies while retaining their people and sustainability of the innovation center. Among these examples we can find the first Schneider Electric’s manufacturing building within the concept of Smart Factory in Mexico, located in the municipality of Apodaca, Nuevo León.

It is worth mentioning the Schneider Electric Smart Factory global program consists on the migration and opening of smart factories all around the world, all of them using EcoStruxure, an interoperable internet platform.

Schneider Electric has launched several smart factories in many countries around the world, including China, India, France, Indonesia and Philippines.

On 6 June 2019 the first smart factory was inaugurated in Mexico. It has six production lines split into two shifts, 1,100 workers in the plant, ISO9000 and ISO14000 quality certifications and it is the first residue-free plant in Mexico.

“In 2020 Schneider Electric reaches its 75th anniversary of operations in Mexico; we have more than seven decades working on the construction of Mexico, from small and medium-sized buildings to industry and homes. The company’s interest to continue operations in Mexico is solid. A clear indication of such interest are the current investment projects like the smart factory to expand its production lines and increase volume through efficiency and digitalization,” mentions in an interview Mr. Nestor Alonso Jiménez, Plant Manager at the Schneider Electric smart factory.

To Schneider Electric, smart factories are a clear example of converging power and automatization. Based on technology, these models use a wide range of digital tools to improve and control operations. As soon as you go into one of these spaces, it is possible to experience the future of manufacturing. For instance, mini data centers store critical local information about the site, which allows better access and security control; the sensors monitor the equipment to predict maintenance needs. Furthermore, augmented reality speeds up operations and maintenance, resulting in productivity gains of up to 7%, while energy innovations achieve savings of up to 30%. This kind of plants not only evidencethe benefits of adopting smart technologies, but also the ease with which any company can start its own digital journey.

“Schneider Electric integrated the best technology with our product EcoStruxure, which reflects its value in a smart factory and brings benefits such as maintenance costs reduction; transparency and visibility of all plant operations in real time; increased efficiency in all the processes and energy efficiency, it even reduces the carbon footprint. We give the clients a plant tour -which at the moment is virtual – for them to observe the operations and the systems we have put in place to make their operations more efficient,” points out Mr. Jiménez.

The plant is a member of the Association for Nuevo León’s Export Maquiladoras and Manufacturers, considering 90% of its output is exported to the US and the rest is distributed among Mexico, Canada and South America.

“Smart factories not only evidence the benefits of adopting intelligent technologies, they also set the example of the ease with which any company can start its own digital journey.”
Schneider Electric

With an initial investment of over 37 million dollars, the Schneider Electric smart factory is a showcase for clients and partners to witness how a digital transformation can aid them to make decisions based on data which translates into better profitability, better performance in asset management and a more intelligent workforce, while maintaining the operation safe, agile and eco-friendly.

In 2019, the multinational made an additional investment of 9 million dollars to transfer production lines to Apodaca and towards the end of 2020 the plan is to invest a further 2 million to continue with Mexico’s digitalization journey. “There are still company tools that we can replicate and are used not only in the smart factory in Nuevo León, but in factories around the world,” comments Mr. Nestor Alonso Jiménez.

As a result of the operations expansion at the smart factory, the workforce increased by 30%. “Luckily, with the results obtained in the smart factory, the company decided to continue to support us and our turnover has gone up over 100% and there are more good things in store for the end of this year and the start of 2021,” reveals Mr. Jiménez.

Little over a year after the launch of the smart factory in Nuevo León, Schneider Electric has managed to reduce its maintenance costs by 30% and has increased the equipment general efficiency by 7%. “We have a more agile and efficient process management with returns of investment of less than a year. We have also implemented these solutions on our critical equipment, for example on the painting system, the drag cobot and the panel board lines, and we monitor critical variables through an alarm system to make decisions in lesser time at a lesser cost. Likewise, we have improved our energy efficiency by an additional 10%, optimized our workforce by 10%, increased our asset adaptability by 10% of the labor cost and spare parts, reduced CO₂ emissions by 377 tons, as well as increased energy savings,” informs the Plant Manager.

• Cloud: Aveva Insight and virtual servers.
• Robotics: robotic arm for Spot welding, it has six degrees of freedom and four external axes.
• Augmented reality: Augmented Operator Advisor.
• Advanced manufacturing: 3D printer.
• Internet of things: Aveva Insight, Video Expert, EcoStruxure Building Operations, Power Monitoring Expert, Asset Advisor.
• Cybersecurity: DCS System.
• Software: Power Monitor Expert.

In 2010, the Schneider Electric smart factory won the Tecnos Nuevo León 4.0 prize for the Grand Commercialization Project Smart Factory category for the results the EcoStruxure platform brings to competitivity and job creation, as well as opportunities in the sector.

www.se.com