As the cost of doing business in China continues to rise, companies are seeking viable alternatives for manufacturing their goods. Mexico has emerged as an increasingly attractive option, especially for businesses near the U.S. border. According to PwC, nearshoring to Mexico could reduce operating costs for U.S. manufacturers by 23%, surpassing the 24% savings of shifting to another low-cost country in Asia.
The Advantages of Nearshoring to Tijuana
Located on the California-Mexico border, Tijuana has become a thriving hub for the nearshoring wave, where companies relocate their production facilities to nearby countries. Choosing Tijuana allows businesses to benefit from lower labor costs, fewer trade barriers, and the ability to serve customers quickly and efficiently.
Real estate developers predict that Tijuana will have 26.35 million square feet of total land and 5.40 million square feet of total rentable area available this year and in 2024. Investment intentions are set to grow exponentially, as Tijuana captures 10.2% of the total industrial space under construction in Mexico during 1Q2023, according to Datoz data.
A Hotspot for Nearshoring
INDEX, a civil association representing manufacturers in Mexico, identifies Tijuana as a primary destination for nearshoring. In the last 18 months, at least 30 new companies have relocated their operations to this border community. The interested companies hail from the U.S, Japan, China, and South Korea, spanning sectors such as medical devices, electronics, aerospace, and automotive.
Recent additions like BD, UFP Technologies, Boe Technology, and Foxconn attest to Tijuana’s appeal as a nearshoring destination. Approximately 20 more companies are waiting for industrial space to establish operations in Tijuana, underscoring the city’s high demand.
Thriving Real Estate Sector
The real estate sector has been bustling with activity as manufacturers actively seek industrial space in Tijuana. The city’s vacancy rate is at an all-time low, with pre-leasing driving most of the industrial activity. The inventory reached 78.5 million square feet (7.3 square meters), according to a market study by Newmark.
Recognizing this demand, the Economic and Industrial Development of Tijuana (DEITAC) announced that 17 real estate developers will invest US$635 million to increase industrial buildings, accommodating the growing interest.
Beyond Aerospace and Automotive
Tijuana’s appeal extends beyond aerospace and automotive industries. The city’s proximity to the U.S. and the availability of a highly educated workforce make it an attractive destination for technology firms. Many software development companies have established operations in Tijuana in recent years.
The Nearshoring Boom in Tijuana
The nearshoring effect in Tijuana is expected to continue in the coming years, with the Mexican Federal Government revealing that at least 400 foreign companies are considering relocating to Mexico, especially in the Northern region.
Tijuana offers compelling factors such as cost savings, skilled labor availability, proximity to the U.S., and government incentives, making it an appealing destination for foreign companies. To explore the opportunities of setting up foreign operations in Tijuana, Mexico, get in touch with one of our Manufacturing Industry Experts. Discover the potential of nearshoring to Tijuana and seize the competitive advantage for your business.
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