Emerging Industrial Markets: Saltillo, Mexico

Demographics

More than 5.6 million people—22% aged 18 to 34—live within 50 miles (80 kilometers) of Saltillo, and 20.3 million consumers are within 250 miles. Saltillo is approximately 188 miles (303 kilometers) southwest of the Mexico/U.S. border in Laredo, Texas, and 54 miles (87 kilometers) west of Monterrey, Mexico.

Figure 1: Saltillo Population Analysis

Source: CBRE Location Intelligence.

Saltillo’s local-warehouse labor force of 74,319 is expected to grow by 43% by 2032, according to CBRE Mexico Research. The average salary for a non-supervisory warehouse worker is US$1.89 per hour (base salary + mandatory benefits).

Figure 2: Saltillo Warehouse & Storage Labor Fundamentals

Source: CBRE Labor Analytics.

Location Incentives

According to CBRE’s Location Incentives Group, among the top incentives offered in Saltillo are discretionary cash grants and tax abatements. The state government can also provide support in the following areas:

• Partnerships with or assistance from institutions such as the Federal Electricity Commission, Institute of Ecology, National Migration Institute and local universities
• Assistance with labor force recruitment from the State Employment Office, including job fairs
• Assistance with expeditiously securing all necessary permits and meeting all regulations for business operations
• Assistance with finding suppliers

Elections will be held on June 4, 2023, which may result in changes to some of these programs.

Figure 3: Top Incentive Programs

Source: CBRE Location Incentives Group.
Note: The extent of state and local incentives depends on location and scope of the operation.

Logistics Drivers

Saltillo is the largest city in the northeastern Mexican state of Coahuila and is connected to Mexico City and Monterrey by railroads and highways 57 and 40. Highway 40 connects Saltillo and the Monterrey area, which is fueling much of the occupier demand in Saltillo. Nearly 80% of goods in the region are transported via trucks. Falcon Premium railway, a new Canada-U.S.-Mexico intermodal service between Canadian National, Union Pacific and Ferromex, will connect Monterrey to Toronto, improving transit time by 6-8 days. Monterrey International Airport (MTY) serves the region by air and is the busiest airport in northern Mexico, with a dedicated air cargo terminal connecting key logistics hubs across the U.S. Automotive manufacturing is one of Mexico’s strongest industries, and the fourth-largest exporter of auto parts globally. Several auto manufacturers have production facilities in Saltillo, including Daimler and General Motors.

Supply & Demand

Saltillo is a medium-sized market in Mexico, with a Class A industrial inventory of 43.2 million sq. ft. Saltillo is made up of three main submarkets—Arteaga, Ramos Arizpe and Central Saltillo—with the bulk of inventory (27.7 million sq. ft.) located in Ramos Arizpe. Despite being the seventh-largest market in Mexico by inventory, Saltillo recorded the third-most net absorption, after Monterrey and Mexico City, in 2022. The region’s Q1 2023 vacancy rate stands at 1.7%, a 120-basis-point improvement quarter-over-quarter and a 380-basis-point decrease since 2021. While nearby markets such as Monterrey have witnessed elevated rent growth, average asking rents in Saltillo have climbed by 2.8% quarter-over-quarter to US$5.20 per sq. ft./year at the end of Q1 2023. Submarket asking rents vary between $4.80 - $5.47 per sq. ft./year.

The Saltillo market is growing, reflected in the 3.8 million sq. ft. of warehouse product that was delivered in 2022. Preleasing of newly built product has vastly increased, with 96% of current projects underway—totaling 2.4 million sq. ft.—already spoken for by future occupiers.

Saltillo’s automotive sector accounts for 46% of total industrial leasing activity in Q1 2023. Tesla’s first gigafactory in Austin, Texas, uses many Saltillo auto manufacturers, and that number is predicted to grow with the development of their additional assembly plant in Santa Catarina, just outside of Monterrey in Nuevo León. The facility will be Tesla’s first in Latin America. Another U.S.-based automotive supplier headquartered in Michigan recently announced a US$47 million investment in expanding operations at an existing Saltillo facility. The General Motors plant in the Ramos Arizpe submarket plans to produce only electric vehicles by 2024.

Saltillo will continue attracting industrial occupiers and investors due to several key factors such as its proximity to the U.S./Mexico border and adjacent markets like Monterrey, as well as accessibility, growth of its labor force and enticing incentives.

Figure 4: Saltillo Historical Data

Source: CBRE Mexico Research, 2023.

Figure 5: Saltillo Size Range Comparison

Source: CBRE Mexico Research, 2023.