Today more than ever it is essential to invest in the industrial sector in order to strengthen recovery and growth processes.The company has been running out of steam since 2019, as a result of the fall in Gross Domestic Product (GDP) and the global industrial slowdown, in addition to public health problems in the mid-2020s, financial volatility and structural concerns (1).
Since then, the Confederation of Industrial Chambers of the United Mexican States (Concamin) has called for a national strategy on infrastructure, with the main focus on the construction industry, since in 2019 alone it had presented a decline of -8% in 20 entities of the country (1).
In this sense, the challenge is even greater if we consider the global scenario, which has affected the industrial production sector to a greater or lesser extent. However, the transition to the new normal is demanding the implementation of our economic and health strategies, policies, dynamics and priorities.
Despite the situation generated by Covid-19, in Mexico the Monthly Industrial Activity Indicator (IMAI) registered a real increase of 6.9% in July 2020 (2).
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This new context demands creativity to reposition the focus on current and developing projects in all industrial sectors. These figures are already beginning to change, and it is necessary to follow up on the issue to see the progress in the matter and glimpse how it impacts the Mexican economy.
To learn more about industrial zones, see our article:
“
Guide to industrial zones for rent in Mexico City: concepts, locations and trends“.
What is the industrial sector?
In general terms, industry or industrial activity, which includes many types of subsectors, is considered as such because it carries out processes of transformation of raw materials into finished products or products that form part of the inputs of other industries (3).
It is a very important secondary sector for the economy of any country, since it implements different processes for the extraction of materials and their transformation into final products for export in B2B or B2C businesses (3).
This area is characterized by innovation and technology, in addition to specialization and division of labor (3).
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These types of activities tend to take place in urban areas and are closely related to the service sector, as part of the constitution of an integrated economy (3). In addition, industry is the sector that generates the most resources for the GDP .
It is also important to clarify that, in addition to naming the set of sectors that transform or transport products, is also used to refer to facilities where large operations (hence the industrial level) are carried out on a single process. or to all industries of the same type or sub-sector (4).
If you are interested in real estate, you can review our text: “Real estate in CDMX: a guide to trends, companies and recommendations after the pandemic“.
Industry types
According to the International Labor Organization (ILO), the general categorization of industrial economic sectors around the world is as follows (5):
In this sense, it is necessary to take into account the different subsectors that exist, considering that not all have the same importance and level of development in the countries where these activities are generated.
The ideal space for any sector or sub-sector is an industrial building.
If you want to know more, we suggest you read:
“Industrial building: guide with everything you need to know”.
What are the main industrial sectors in Mexico?
According to the National Institute of Statistics and Geography (Inegi), there are four major industrial sectors in Mexico: mining, electricity, water and gas generation, construction and manufacturing. These include the following industrial sectors and activities (2):
Mining. Extraction of oil and gas, metallic and non-metallic minerals, and related services.
Generation, transmission and distribution of electric power, water and gas supply through pipelines to the final consumer. Includes the same activities mentioned above.
3. Construction. Building, civil engineering and specialized works.
4. Manufacturing industries. Food, beverage and tobacco, textiles, leather and fur tanning and finishing, wood, paper, printing, petroleum and coal products, chemicals, plastics and rubber, manufacture of non-metallic mineral-based products, metal products, machinery and computer, communication, measuring and other equipment, electronic components and accessories, electric power generation equipment, transportation equipment, furniture, mattresses and blinds, and other manufacturing industries.
In Vallejo Properties we have warehouse clusters and industrial spaces that have great facilities, such as electrical substations, wells and other elements that can be very useful for your industrial processes.
Contact us at
and we will be happy to schedule a visit to our properties so you can get to know the benefits that our different locations offer you.
Another space suitable for an industrial business is the CEDI. If you are interested in learning more, please contact us: “Distribution centers (CEDIS): types, characteristics and trends for the strategic management of these spaces”.
Figures from the industrial sector in Mexico
In the four most important industrial sectors in our country, there is an important variation in the most recent cut-off in July (2):
In this sense, we see that the manufacturing industry is the one that has grown the most in the month’s comparative, and the one that has grown the least is mining. Compared to the previous year’s values, the construction industry is the most affected.
Likewise, the growth of this industry has been equally limited, as much as mining, in the month’s comparative. On the other hand, the generation, transmission and distribution of electricity and gas to the final consumer has a more controlled variation, although negative from the previous year and positive from the previous month.
Finally, the four items presented a clearly negative change with respect to the previous year and with slow advances with respect to the previous month. This is due to the aforementioned variables regarding the world economic situation and the need for a national strategy for investment and growth in these areas.
If you are interested in commercial premises, we suggest you read:
“Renting commercial premises: economic activation guide”.
Industrial sector projections 2020-2021
According to the consulting firm Deloitte, the fall in Mexico’s GDP, due to the stoppage in economic activity and social confinement, is impacting industries in a heterogeneous manner, so the analysis and projection of these sectors is variable (6).
In this sense, by the end of the year and the beginning of next year, a contraction is expected in activities that depend more on social interaction, such as those related to tourism and services, with the exception of areas such as health or telecommunications (6).
The impact on industries as a result of the pandemic has been heterogeneous, so the recovery will take place in the same way, with customized strategies in each area.
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A generalized deterioration of economic conditions is also predicted; however, the speed of recovery of the industries will be differentiated and will depend on the financial stimuli and the time it takes to extend the sanitary and social distancing measures (6).
This is why, for each of the industrial sectors, there is a growth forecast at the end of the year based on the heterogeneity of the economic impacts, according to what has been analyzed up to June by Deloitte. It should be clarified that the following traffic light and classification is neither official nor governmental (6):
– Food industry. Its performance traffic light is green, meaning that it has an annual variation greater than the upper limit. It is expected to close with -1%, since, although it started the year with positive numbers, the drop in consumption affected this forecast.
– Financial services. Your traffic light is yellow, which means you are within range. Its growth forecast is -7.5%, due to the fall in market rates and the volatility in the exchange rate, which is reflected in the banks’ liquidity.
– Energy. Its traffic light is green and has a forecast of -8%, due to the internal financial problems at Petróleos Mexicanos (Pemex) and the Federal Electricity Commission (CFE), in addition to the events resulting from Covid-19 and the changes in energy policy underway.
– Telecommunications. Its traffic light is green and its growth forecast is 4% (the first positive on the list). This is due to the fact that social isolation intensified the use of technology to continue productive activities, so that this sector became present in other important segments.
– Consumption. Traffic light yellow with a closing forecast of -8.8%. Although this industry was strengthened through digital channels, marketing is expected to have a significant drop, as the demand will be to meet the challenges of the new normal to make consumption and sanitary habits sustainable during the recovery.
– Construction. It is at the red traffic light, which means it is below the lower limit. Its forecast is -16%. The suspension of activities significantly harmed this industry, especially for the acquisition or development of new projects, but has allowed the availability of space to be greater.
This can be an unprecedented opportunity if you are looking for a commercial, corporate or industrial space, like the ones we offer in Vallejo Properties. Contact us for more details.
– Mining. Traffic light green and -9% growth forecast. This is due to the decline of activities in the automotive, manufacturing and metal-mechanic industries, which influence demand and investment in this sector.
– Health sciences. Yellow traffic light with a positive forecast of 5%. In the wake of the pandemic, there has been a logical increase in demand in this sector, which has translated into economic benefits, but it remains to be seen what happens after the expected decline in infections.
– Tourism. With red light, minus 16% at closing. Undoubtedly, this is one of the most affected sectors, so it will be essential to pay attention to measures to promote and reactivate the sector.
– Manufacturing industry. Red light and minus 9%. It is important for this sector to readapt its supply chain and identify service risks in order to understand new customer needs and changes in demand. Within this industrial activity, the following are included:
– Heavy industry. With a forecast of -16% and a red light.
– Electrical-electronics. Red light with -19% forecast for year-end.
– Chemistry. Yellow traffic light with -8%.
– Machinery and equipment. Red light with -22%.
– Textile and footwear. Traffic light red and -8%.
– Automotive. Red traffic light and -19% closure in 2020.
This sectoral analysis allows us to identify the variables of decline in the various areas of the industry, in order to generate a diversified strategy that takes into account the situation of each of the productive sectors in the country.
Undoubtedly, this is a major challenge, especially if you are looking for a space for your business. At Vallejo Properties you can count on us to support you in the transition to the new normal, without being left behind. Write to us and we will advise you.
A space that we recommend for an industrial project, are the warehouses of this type, c
Learn more in:
“Industrial warehouses: characteristics, areas and recommendations”.
Keys and trends 2021 of the industrial sector
The industry faces a number of challenges, among which six key trends for the development of the “factory of the future” stand out. It is important to consider that this new agenda must be designed with flexibility, but with the objective of long-term sustained development (7):
1. Consumer demand will be largely personalized and individualized. This will have as a context the ecological perspective that will dominate the use of resources and the measurement of our impact on the environment.
2. Artificial intelligence and cobots will be fundamental elements for production, taking into account automation in different industrial areas, shortening inefficiencies and reducing long working hours.
Production lines must be flexible so that they can be rearranged when required, taking into account times of crisis, such as the one we are experiencing now.
In this sense, artificial intelligence will serve to refine and parameterize human instructions. In addition, cobots, or collaborative robots, will be engaged, rather than replacing, to work hand-in-hand with humans in the improvement and safety of industrial spaces, without threatening jobs.
3. Virtuality will be essential to verify processes and errors, with the so-called “digital twins”, with which it will be possible to simulate the operation of certain machines, equipment or devices, before the production line is put into operation.
This makes it possible to remotely review the operating models, foreseeing risk situations and optimizing time and methods in tests that are usually exhaustive. It is also important to consider machine learning as a source of predictive analytics to streamline and improve performance.
4. Along with these technological advances, it will be important to regulate the connection of machines, processes and people, which will be enabled by the internet of things, 5G and augmented reality.
In this way, it is not only important the execution, but the creation of standardized protocols to drive the transition of the industry and the accompaniment of the same, safeguarding the data with effective protocols based on engineering and business fundamentals.
5. In this regard, information will play a key role, more than ever, to predict, correct and evolve the calculations, systems and processes, so that the edge computing paves the way for a new and decisive functionality of data and information in production algorithms, of virtually all industrial sectors.
Another important part of information and analytics is the observation and execution of digital strategies to commercially accelerate your business.
One of these strategies is based on the tool of Google Adsfor the creation of ads focused on your target audience. Mastering technology and information in this regard will make your business a specialized powerhouse within the industry.
6. From this same perspective, it will be important not only the demand from consumers, but also the demand for specialization that will be required for professionals in these areas in order to cope with the new normality.
In addition, the operation of any industry will demand spaces that are better equipped to carry out its processes in a sustained manner.
Finally, the economic outlook for the industrial sector, according to the sectoral analysis, is not favorable in all cases: in most cases, a contraction and a technical recession are indicated, in general terms, due to the prolongation of the health phenomenon.
The Mexican economy will be one of the hardest hit by the pandemic, according to the International Monetary Fund (IMF), taking into account that the world economy will fall 4.9% (8).
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In this sense, transformation will take place at all levels in much of the world, so it is necessary to accept and cope with change, as soon as possible, to take into account industry trends and key factors in order to take the next step in your business.
Don’t forget that in Vallejo Properties we have an appropriate and equipped space for your industrial growth ideas. Get to know our properties and take advantage of the properties we have for you.
If you are looking to learn more about the real estate market, read our article:
“Real estate market: spaces, trends and projections 2020-2021”.
References
1. Antonio García. Mexico’s industrial sector calls for national construction strategy. Urban Center, 2020. Accessed September 24, 2020.
2. Inegi.
Monthly Indicator of Industrial Activity
. National Institute of Statistics and Geography (Inegi), 2020. Accessed September 24, 2020.
3. Amalia Gonzalez.
Definition of Industry
. Simple Economics, 2018. Accessed September 25, 2020.
4. EcuRed. Industry. EcuRed, 2019. Accessed September 25, 2020.
5. ILO.
Sectors and industries
. International Labor Organization (ILO), n/d. Accessed September 24, 2020.
6. Deloitte. Industry Trends | July 2020. Deloitte and Econosignal, 2020. Accessed September 25, 2020.
7. Philipp Wallner. 5 Industry 4.0 trends: the Factory of the Future (2020 and beyond…). Intercompany, 2020. Accessed September 28, 2020.
8. Leticia Hernandez.
Mexican economy will be one of the hardest hit in the world by COVID-19, according to the IMF.
. El Financiero, 2020. Accessed September 25, 2020.
