MSREI sells four warehouses as near-shoring trend picks up

The four industrial properties located on the Texas-Mexico border were sold to two institutional buyers.

Morgan Stanley Real Estate Investing has sold four industrial properties on the Texas-Mexico border in a deal reflecting growing tenant demand from the so-called near-shoring of manufacturing and other business operations, PERE has learned.

The properties, which span a total of 1.2 million square feet, fetched $178 million and were sold to two institutional investors, according to MSREI. Two properties are in El Paso and two in Laredo, and all are within 10 miles of the US border with Mexico.

“We invested in these assets three years ago, believing that the US and Mexico would be major beneficiaries of the diversification of global manufacturing,” MSREI co-chief executive officer Lauren Hochfelder told PERE. “We have seen this play out in our leasing at the assets and expect the near-shoring trend to continue.”

She said the terms of the sale exceeded original underwriting, and the depth of the institutional demand for the assets was “tremendous.”

“There is a lot of talk about capital on the sidelines, and investors’ concerns about the commercial real estate market more broadly, but for the preferred sectors and markets we are seeing depth of investor appetite,” she said.

Morgan Stanley research projects US e-commerce sales to grow 8-9 percent each year over the next half-decade, but a “reconfiguration” of the global supply chain is a current major focus of MSREI’s industrial strategy, according to Hochfelder.

“We are doing a U-turn on globalization. My entire adult life was about globalization. It’s now about de-globalization and a China-US decoupling,” she said. “We’re believers that the supply chain of the last 20 years will not be the supply chain of the next 20 years.”

The concepts of near-shoring, on-shoring and friend-shoring have become major discussion points in the industrial real estate market in recent years as supply chain disruptions have wreaked havoc on companies’ shipping and transport routes. Increasingly, companies are looking to lower their exposure to disruptions by bringing their manufacturing operations back to the US or in nearby markets, like Mexico.

These global supply chain shifts have benefited Mexico, as many companies have moved there to make use of policies and regulation, per Prologis. Mexico is the only developing country that has free trade agreements with the US, Canada, the European Union and Japan, according to a report from the firm last year. Further, every $1 billion invested in Mexican auto factories can generate 5 million-10 million square feet of local logistics demand, the report found.