Warehouse, Outdoor Storage on Southern Border Could Win in Tariff War

Some might be spooked by President-elect Donald Trump’s tariff talk, especially the late November announcement that he’d levy 25 percent tariffs on Mexico on day one.

But, while much of the world waits to see how Trump wields this threat and what economic fallout comes from one of his most famous 2024 campaign promises, many industry analysts believe the impact on trade with America’s southern neighbor could benefit industrial real estate near the U.S.-Mexico border.

“The Texas border is not just a gateway for international trade; it’s a transformation zone,” said Steve Triolet, senior vice president of research and market forecasting for Partners Real Estate, an investment firm. “By assembling goods stateside, businesses can mitigate tariff impacts while leveraging the region’s skilled workforce and robust infrastructure to seamlessly deliver products to U.S. markets.”

The cross-border trade bloc set up in 1994 by the North American Free Trade Agreement (NAFTA) and then refined by 2020’s United States-Mexico-Canada Agreement (USCA) was worth more than $1.5 trillion in 2022. Roughly 18,000 trucks a day leave from manufacturing plants in Monterrey, Mexico, headed to the U.S. border. Elections and new leadership on both sides of the border — Claudia Sheinbaum took the presidency in Mexico on Oct. 1 — portends significant trade shifts and changing economic trends. Analysts see warehouse and industrial outdoor storage not merely surviving, but thriving in an environment where tariffs, reshoring and manufacturing growth in both nations supercharge demand.

That’s because even the threat of tariffs on goods from countries besides Mexico can drive the development of manufacturing plants and storage sites, including warehouses, on either side of the U.S.-Mexico border. Such a surge happened during the first Trump presidency, and post-pandemic onshoring trends as well as the Biden-era factory-building boom in the U.S. will only help. Companies have already invested significant money in supply chains and would be hesitant to change. 

That’s the best-case scenario, at least. 

“We didn’t know the election outcome,” said Triolet. “Now, I’m sure people are sharpening their pencils right now. They’re reviewing sites.”

Economic growth in Mexico, which became the United States’ largest trade partner in 2023, has sent business surging across the border. Imports from Mexico are up 39 percent over the last five years. Laredo, Texas, the nation’s busiest inland port, accounts for $250 billion in annual trade, with approximately 24,000 trucks worth of daily traffic expected by 2030. 

Despite that growth, it’s a relatively small industrial real estate market by regional standards, with just 41 million square feet of warehouse space and 4 million square feet under construction. That’s a fraction of the more than 1 billion square feet in the Dallas area alone, for instance. But with a 1.9 percent vacancy rate in Laredo, any uptick in demand resulting from trade shifts would likely drive additional warehouse construction. Between the three big Texas border markets — Laredo, McAllen and El Paso — there’s roughly 8.8 million square feet in the construction pipeline, a drop in the bucket compared to the nation’s largest industrial markets. 

Mexico, of course, offers plenty of advantages as a trade partner for the U.S., before factoring in tariffs. Average labor costs in the nation, at $2.80 an hour, are more than a dollar less than China’s $3.90 an hour, and the country has invested billions of dollars in roads, ports and other infrastructure to accelerate trade. 

“I think the regionalization trend wants to continue,” said Craig Meyer, JLL (JLL)’s president of industrial for the Americas. “The tariff impact will come down to the details. How do you define it — what’s made in Mexico versus China?”

The trucks that transport all these goods need places to rest, refuel and unload, making industrial outdoor storage assets in these regions particularly valuable. Matt Hunsucker, a longtime investor and the founder of the IOS List industry newsletter, said that as industrial outdoor storage assets in and around critical hubs like Laredo McAllen, and El Paso have seen significant rental growth, the impact has extended to Houston, Dallas and even secondary logistics centers like Corpus Christi. There, IOS space is 15 to 20 percent cheaper. 

Hunsucker believes surgical tariffs imposed on China, as opposed to friendlier nations, will be a boon for border region truck lots and container storage space. It helps that the vast majority of Mexican truck drivers by law can drive only so far into the U.S. before they must stop and swap cargo with a U.S. trucker. 

“Increased tariffs would likely intensify IOS demand in Texas border markets,” Hunsucker said via email. “Tariffs often lead to increased inventory levels as companies pre-purchase goods to avoid higher costs or navigate supply chain disruptions. As a result, IOS becomes indispensable for increased throughput of these goods. Additionally, more tariffs could spur further reshoring and nearshoring, creating more manufacturing activity on both sides of the U.S.-Mexico border. 

“I believe the proposed 25 percent tariffs on Canada and Mexico are a negotiating position,” he added ahead of Thanksgiving. “Trump wants to see immediate reduction in illegal immigration at the southern border and book an early win. Mexico is likely to comply and angle for a lower tariff, or none at all.”

Timber Hill Group, a Chicago-based IOS investment firm, recently closed on its fifth and sixth properties in Laredo, part of a $20 million cross-border investment fund meant to play off this trade. CEO Cary Goldman said he’s seen a slowdown in the last six months, as elections in both countries injected uncertainty into deal-making. But Goldman maintains a positive outlook on Mexico’s manufacturing growth, and he believes the market is clearly saying that, regardless of outcomes, robust manufacturing and distribution from Mexico to the U.S. is going to continue.

“The industrial real estate community hopes for open dialogue with Canada and Mexico to find mutually beneficial compromises,” Goldman said. “As pressure mounts to maintain a stable and balanced North American supply chain, a short-term compromise may be reached during the USMCA’s first review talks in 2025, ahead of the January 2026 deadline.”

There is some historical evidence that tariffs can boost industrial demand along border states. When a 25 percent tax rate was applied to select Chinese imports in 2018 during the first Trump administration, it boosted North American trade and logistics traffic across the southern U.S. border. In the years since, firms from across the globe set up manufacturing in Mexico to make sure it’s the last stop on the road to the U.S., and more nearshoring plays have led to substantial factories in northern Mexico. Tesla is building a $10 billion EV plant in Monterrey, and GM, Hyundai, and steelmaker Ternium combined have sunk billions of dollars to locate plants in Mexico. 

JLL’s Meyer also sees manufacturing and factory growth in the U.S., especially in the Southeast, as contributing to this dynamic as well. More goods and items will be built, shipped and transferred across the border in both directions, strengthening the need for industrial space.

But tariff and trade restrictions can also backfire. Trump’s suggestion of a 100 percent tariff on cars built in Mexico by Chinese companies could complicate the valuable cross-border automobile trade. And the USMCA will need to be renewed by all parties in the summer of 2026, following that January review.

Uncertainty may benefit border real estate, though. As Triolet noted, supply chain panics during the pandemic caused consumers and companies to stock up. Any signs of trade stress may simply lead to more demand to store goods in the U.S.

“As long as we have rules within reason, it should really still boom,” said Goldman.