The business world uses different strategies for national and international positioning. Entrepreneurs are always looking to create trends and take advantage of opportunities that allow them to achieve the much sought-after market and success. One of these multiple strategies is nearshoring, which we will discuss below.
What is nearshoring?
The term “nearshoring” comes from the combination of the words “near” and “outsourcing”, and is a term used to refer to the location of processes, services, and functions of a company to a country other than that of its original headquarters. It is important to mention that the country to which the operations are moved must be close to the country of origin, unlike offshoring, which is to a more distant country.
What is the objective?
The nearshoring takes advantage of the cultural similarities with the country to which the services are transferred, so it seeks to be close to the same region or continent. Its objective is to reduce costs and maintain assertive communication with the work team. A clear example of this in Mexico is the construction of the Tesla plant in California, USA, which will now be based in Monterrey, Mexico.
Advantages of nearshoring
- Increases the company’s growth potential.
- Portfolio diversification.
- Allows investors to adapt quickly to market demands.
- Boosting a country’s economy through foreign investment.
- Job creation
- Improvement in the standard of living of the local population.
Nearshoring and its impact on the real estate sector in Mexico
Mexico is undoubtedly the leading and preferred country by the United States and Canada for the implementation of this strategy. Trade agreements such as the T-MEC give direct access to the U.S. market. Mexico offers the perfect mix of proximity, a skilled labor force, and attractive costs.
Commercial real estate developments in Mexico are backed by strong occupancy rates and rental growth, as nearshoring encourages developers to move to acquire and build new industrial properties, including “exceptionally high” occupancy rates of nearly 98%, according to the Mexican Association of Industrial Parks.
The foreign investment generated by nearshoring not only increases demand for commercial properties but also drives construction and renovation projects, as foreign companies seek modern, well-equipped spaces for their offices or factories. Likewise, due to the installation of industrial parks or headquarters, new jobs are generated, which results in new people arriving in the locality and requiring nearby spaces to live in, thus propitiating a greater demand for housing either for sale or rent.
In conclusion, nearshoring is a trend that is very beneficial both for the company that applies it and for the country in which it is applied. In Mexico alone, this tactic is becoming increasingly consolidated, and it is expected that in the future the country will continue to be a leader in Latin America. International treaties such as the T-MEC strengthen commercial ties between Mexico, the United States, and Canada, allowing the three countries to build businesses that are positive for their economies and populations.