Smith, whose expertise is in cross-border industrial sales and leasing, says that while the deal would be big on the San Diego side, this one is modest for the Tijuana area. The manufacturing and warehousing operations that the area attracts are typically larger than commercial operations north of the border.

The industrial market in Tijuana totals 50 million square feet compared to 108 million square feet in San Diego.

Industrial isn’t the only form of commercial real estate booming in Baja California. Malissa Hathaway McKeith of Lewis Brisbois Bisgaard & Smith notes the wave of retirees moving south of the border to avoid the high cost of spending their golden years in California is spurring retail development.

“They want where they retire, what they do to be familiar,” says McKeith, who chairs the firm’s real estate practice group. “So all the things one looks for in a retirement or suburban development in the United States, they want to see in Mexico.”

Retail giants Wal-Mart and Costco already have a presence in Mexico, but McKeith envisions that retail serving Americans would include familiar restaurant chains, supermarkets and other services offered in their neighborhood shopping centers back home.

While the companies may be generating sales in Mexico, McKeith says in general, foreign investment in Mexico will benefit the United States. Her job, for one, benefits as more companies seek her firm’s services. Beyond lawyers there are architects, engineers, real estate and mortgage experts, title companies, investors and more who will provide an important supporting role.

“These may be people who were facing less work in the U.S. because the real estate market is going down,” says McKeith. “This is a moment in time when you’re seeing a lot of people who are building in Alpine or North County say, ‘Well, maybe I can learn the ropes and do this in Mexico, too.’”

Research from NAI Mexico, one of Tijuana’s leading real estate groups, shows the vacancy rate among all commercial properties is low, with warehouse and manufacturing properties averaging 6 percent to 6.5 percent. The company also asserts 2005 marked the first year of real increase in property values after a 10-year slide. This change is tied to what’s being called the biggest manufacturing turnaround in Baja California’s history.

Foreign investment in the manufacturing sector was $6 billion in Mexico during 2005 and was expected to rise in 2006, with a high concentration of those investments in Baja California.

With concern that the U.S. real estate market has seen the last of double-digit returns, global investors and developers are following corporate users into Baja California. Institutional and private investors for industrial properties are taking advantage of U.S. style leases, denominated in U.S. dollars and guaranteed by companies in the parent country. Current returns range 2 percent to 5 percent higher in Mexico than elsewhere.

When Mark McGovern and Wayne Paulus of CBRE/Melody started lending money for commercial investments in Mexico at the beginning of this year, the reasoning was to better serve their office’s client base. Already, the office has arranged loans in excess of $30 million and is projecting another $100 million next year.

While helping clients was one reason for the jump into lending in Mexico, the move wasn’t all altruistic.

“Both lenders and investors can get higher yields on their money, resulting in higher profit,” says Paulus, adding that the interest rates available through U.S.-based lenders are still more attractive than what Mexican banks have offered. The typical loan-to-value ratios from U.S. lenders for Mexican real estate purchases range from 60 percent to 70 percent for industrial and 50 percent to 55 percent for resorts.

Lenders are alongside buyers in their growing comfort level about stepping south of the border to do business.

“Many of the same, sound real estate practices you see in the U.S. now can be used in Mexico,” says Paulus, “such as good location, good sponsorship, stable currency, good tenants, respectable loan to values and good cash flow on the project.”

Although industry experts in the San Diego and Tijuana region are optimistic about growth and opportunities, the commercial real estate market faces obstacles that no amount of economic stability and improvements in processes can ease. Now and into the near future, demand will outweigh supply of suitable commercial sites. There is not enough flat land to build on, especially in the highly sought after border area, and the water supply is limited. Increased competition for land from the residential market adds a twist that may make commercial development a victim of its own success.

“When the maquiladoras took off 20-30 years ago, there was a huge difference between the lower and upper class,” says Martinez. “Now you have a middle class that has grown with the manufacturing industries. The residential market has really taken off in Mexico and you have an emerging middle class with demands for housing.”