Global Supply Chain Restructuring CRE Opportunities

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Commercial Real Estate Opportunities in the Wake of Global Supply Chain Changes

Global supply chains are in the midst of a major restructuring. This is due to a combination of factors but primarily:

• Geopolitical

• Demographic challenges in China

• Lower Labor Costs in Latin America than China

The geopolitical relationship between the US and China has deteriorated significantly over the last several years for a variety of reasons like increased authoritarianism, covid, balloon drones, etc.

This is happening at the same time that China’s population profile is becoming more weighted to older people than younger people. More older people than young people means a less productive population and economy. And the Chinese government recently publicly admitted they had over-counted their population by 100 million people. Big oops.

China’s labor costs are not as globally competitive as they used to be. Factoring for shipping and other costs, Mexico now has a cost of labor available to US companies roughly one third the cost of Chinese labor.

Looking at these factors it’s easily to understand why so many companies are moving production out of China and back to North America.

What does this mean for commercial real estate?

The implications of the shift in global supply chains on commercial real estate in the United States and Mexico are profound, as the demand for industrial space surges on both sides of the border. This increased demand will manifest itself differently in each country, with the US seeing growth in warehousing and distribution, while Mexico experiences a manufacturing boom.

In the United States, the demand for warehousing and distribution facilities will grow as companies strive to optimize their supply chains and reduce lead times. This expansion will require large, modern warehouse spaces that can accommodate the increasing use of technology and automation in supply chain management. Investors and developers should target strategic locations with strong transportation infrastructure, proximity to major consumer markets, and access to skilled labor. Both established urban centers and emerging secondary markets will benefit from this trend, as businesses aim to diversify their distribution networks and reduce logistical costs.

In Mexico, the focus will be on expanding the manufacturing sector, as companies take advantage of lower labor costs and Mexico's strategic location. This growth will create demand for new manufacturing facilities, as well as the supporting infrastructure such as logistics hubs, worker housing, and transportation networks. Investors and developers should concentrate their efforts on established and emerging manufacturing regions, such as Bajío, Monterrey, and Tijuana, that boast well-developed infrastructure and a skilled labor force. Industries with the most significant growth potential include automotive, aerospace, electronics, and medical devices.

Ultimately, this shift in global supply chains will have a transformative impact on commercial real estate markets in both the United States and Mexico. By understanding the unique dynamics and requirements of the warehousing, distribution, and manufacturing sectors, investors and developers can capitalize on the myriad opportunities presented by this evolving economic landscape.

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P.S. If you're brand new to the EN Capital newsletter; each week we promote a new capital source for a variety of commercial real estate properties. So if the above lender is not relative to you, the chances are high that we'll have the perfect capital source for you soon.P.P.S. EN Capital is a commercial real estate mortgage brokerage shop. We are not direct lenders. Seriously, every time we do a blast some guy responds and gets pissy when he realizes we're brokers. It's on the top of our website, LinkedIn, clear in all our marketing. We honestly don't know how to make it more obvious. Don't be that guy.P.P.P.S. If you have a commercial real estate deal, unrelated to the above, that needs capital right now reach out to us and let's chat!

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Nathan WhighamPresidentCA DRE Broker License: 01793655EN Capital Contact Info:www.encapital.com[email protected]Direct Line: 310-465-9253

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