MS Debunking the Value Add Myth

Mexico Industrial Real Estate, Technology, Latin America Insight

Morgan Stanley México, Casa de Bolsa, S.A. de C.V.+

Alejandra Obregon Economics, Public Policy & Strategy Equity Analyst

Debunking the Value-Add Myth; Morgan Stanley C.T.V.M. S.A.+

Fernando D Sedano Chief LatAm Ex-Brazil Economist

Cesar A Medina Investors who see IT hardware as low-impact (vs. auto) may be Equity Analyst underestimating an ecosystem that could become Mexico's Ariana Salvatore largest export vertical in 2026, >US$120bn. Auto remains a Equity Strategist benchmark sector, but IT is complementary, driving higher Erik W Woodring productivity, better jobs, capital efficiency. Reiterate OW Vesta & Equity Analyst FPrologis. Ronald Kamdem, CFA Equity Analyst Key Takeaways Morgan Stanley México, Casa de Bolsa, S.A. de C.V.+ We think Mexico’s IT hardware/AI ecosystem is emerging as a structural driver, Nikolaj Lippmann potentially positioning the country for new industrial real estate growth Equity Strategist

Market skeptics argue that IT hardware growth, amid perceived auto weakness, Morgan Stanley & Co. LLC reflects a shift toward a lower value-add & non-real-estate-intensive model Dylan Liu Research Associate Our proprietary Leontieff analysis tells a more nuanced story. Auto remains the anchor in scale, GVA share, capital formation,job creation & returns, but IT … Morgan Stanley C.T.V.M. S.A.+ …has a comparable value-add intensity, leads on productivity, labor quality & Mario Simplicio capital efficiency. We see it as a fast scaling sector with solid potential ahead Research Associate

We lift our 2027 GDP forecast to 1.9% (from 1.7%), driven by IT hardware/AI Julia Lobato Barbosa export and investment boom and see OW Vesta & FPrologis as best positioned Economist

Morgan Stanley México, Casa de Bolsa, S.A. de C.V.+ We argue that Mexico has the potential to scale its IT hardware/AI–related Ernesto Gonzalez ecosystem under what today is a largely USMCA-compliant framework, setting Equity Analyst the stage for the next leg of growth for industrial real estate. In a recent note

(see The Finish Line Is Not the Race: Mexico's Role in the US Data Center Build-Out Morgan Stanley & Co. LLC

Relay), we made the case that Mexico is increasingly a beneficiary of the US data Jenny Li Research Associate center build-out wave, with an emerging USMCA-compliant tech ecosystem (IT hardware/AI–related). That tech ecosystem not only has the potential to translate into a tangible industrial footprint but is on track to become the country's largest export vertical — potentially surpassing the auto sector, which has anchored Morgan Stanley does and seeks to do business with Mexican exports for decades. We argue this dynamic could be setting the stage for companies covered in Morgan Stanley Research. As a result, Mexico's next industrial real estate leg of growth. investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley The pushback has been consistent: Bears argue that the rise of IT hardware/AI — Research as only a single factor in making their investment amid a perceived auto slowdown — signals a shift toward a lower value-add, decision. assembly led model with limited real estate growth potential/intensity and weaker For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this economic spillovers, fewer and lower-quality jobs, and adding only second-tier report. tenants to core industrial real estate hubs; in this note, we test that view against the += Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member data to assess whether it holds or underestimates the structural shift underway. and may not be subject to FINRA restrictions on communications with a subject company, public appearances However, the data and our analysis tells a more nuanced story. Our takeaway is and trading securities held by a research analyst account.

Morgan Stanley C.T.V.M. S.A.+ that IT is complementary to autos — while still earlier-stage, it is scaling rapidly and, Julia…