Demand for industrial space in Mexico has surged as manufacturing logistics have been rerouted because of geopolitical tensions. Industrial building vacancy rates have dropped to historic lows. Mexican industrial market fundamentals are strong.

But to sustain its growth, utilities must keep up. Mexico's energy market has been going through dramatic struggles and transformation, and substantial infrastructure investment will need to occur if the nearshoring trend is to continue.

The Core Problem

Between 2018 and 2024, Mexico's national transmission network grew around 4%, while electricity demand surged approximately 15%, nearly four times faster. In 2023, CFE's actual infrastructure investment was only 21% of what its own planning deemed necessary to maintain and expand the grid. That chronic underinvestment has had consequences such as outages and climbing electricity bills. Quite simply CFE’s grid has not kept up and we are all starting to feel it.

Finding the Balance

For most of the 20th century, the Comisión Federal de Electricidad (CFE) Mexico's state-owned electric company (founded in 1937), held a near-total monopoly on power generation and distribution across the country. That started to change in 2013, when a landmark reform opened the sector to private investment for the first time in decades. Competitive electricity markets were created, renewable energy developers were welcomed in, and solar and wind projects multiplied.

However, in 2018, a new administration reasserted state control of the energy market through a series of administrative actions such as: suspending new renewable energy tenders, altering grid dispatch rules to favor CFE-owned plants over cheaper private generators, and calling for a review of existing private electricity contracts. This was taken a step further under President Claudia Sheinbaum, in 2024, a constitutional reform was passed in which at least 54% of all electricity dispatched to the national grid must come from CFE, leaving 46% for private producers.

The Way Forward

Fortunately, the government is now treating the infrastructure gap as the emergency it is. CFE's 2025–2030 transmission expansion plan commits MX$164 billion in investment (275 new transmission lines and 524 new substations) with a direct focus on northern manufacturing corridors, exactly where industrial demand is concentrated.

Additionally, the private sector still has a real role to play. The new Permiso de Autoconsumo, created under the Electricity Sector Law (LESE), allows companies to legally generate and consume their own electricity on-site. Projects under 0.7 MW need no permit. Projects between 0.7 MW and 20 MW go through a streamlined permitting process.

This is the right direction. Energy demand will only grow as time passes, leaving the responsibility entirely to the government would be a huge mistake, as history has already demonstrated. However, for the private sector to be part of the solution the rules need to stay stable. Every time they change, investor confidence erodes, and the capital Mexico urgently needs walks out the door.

For industrial parks, the Permiso de Autoconsumo is the most immediate opportunity. A 20 MW on-site installation (gas, diesel, solar, or whatever the tenant needs) can cover energy needs of a sizable building. Developers who secure permits and build this capacity into their parks now will have a tangible advantage over those who wait for the public grid to catch up.

How This Affects Industrial Real Estate

Location decisions carry more weight than before. Not all industrial corridors have equal grid access, and that gap is widening. Markets like Monterrey, which account for roughly a third of all active industrial projects in the country, have comparatively better infrastructure, but also a lot more players fighting for that limited resource. Thankfully the CFE is legally required to provide 200 KVAs for all land parcels. Any additional capacity from the CFE must be sourced directly through the CFE or through the secondary market, if available. It can get extremely pricey. Proximity to a natural gas pipeline is another location factor worth prioritizing, as it opens a reliable alternative fuel source.

After years of industrial real estate vacancy rates at sub 1% , they have normalized at around 7%  and the market is becoming more selective. Future demand will no longer absorb everything indiscriminately; energy reliability has become the primary differentiator.

For developers, invest in on-site energy infrastructure, it can be solar, gas, battery storage, backup generation, etc. The Permiso de Autoconsumo framework makes powering your building more feasible than ever before. Get permitting started early; Mexico's bureaucratic process rewards those who plan and work with experienced operators. Also think beyond the transaction, developers who help tenants navigate utility solutions become trusted long-term partners, not just landlords.

Developers who treat energy as part of their core offering will be the ones winning tenants.

The Bottom Line

Mexico's energy market is at an inflection point. The uncertainty of the past several years is giving way to a clearer framework, one that still has real constraints, but also opens opportunities. Energy is no longer a given. It is a variable, and the developers who manage it as part of their core offering will set themselves apart and will be sure to capture those international clients looking for long-term contracts.

We live in a world where energy demand only goes up, developers who are proactive and find solutions to meet tenant needs will win.