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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by, and welcome to today's FIBRA Prologis Fourth Quarter Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]
I would now like to hand the conference over to your host. Mr. Kosta Karmaniolas, Head of Investor Relations. Thank you. Please go ahead, sir.
Thank you, Katrina, and good morning, everyone. Thank you for joining us for our fourth quarter 2020 earnings conference call. Today, we will hear from Luis Gutierrez, our CEO, who will discuss our strategy and market conditions; and from Jorge Girault, our Senior Vice President of Finance, who will review results and guidance. Also joining us today is Hector Ibarzabal, our Managing Director.
Before we begin our prepared remarks, I would like to remind everyone that all of the information presented in this conference call is proprietary and all rights are reserved. The information has been prepared solely for information purposes and is not a solicitation of an offer to buy or sell any securities. Forward-looking statements during this call are subject to a number of risks and uncertainties our actual results, performance, prospects or opportunities may differ materially from those expressed in or implied by the forward-looking statements. These forward-looking statements are current as of the date of this call. We take no obligation to publicly update or revise any forward-looking statements after the completion of this call, whether as a result of new information, future events or otherwise, except as required by law.
Additionally, during this call, we may refer to certain nonaccounting financial measures. As is our practice, we had prepared supplementary materials that we may reference during the call as well. If you have not already done so, I would encourage you to visit our website at fibraprologis.com and download this material.
With that, it is my pleasure to hand the call over to Luis.
Thank you, Kosta, and good morning, everyone. I hope you all stay safe and healthy. 2020 was an exceptional year for FIBRA Prologis as our operating and financial results surpassed our expectations. We exceeded our internal growth objectives and completed our capital deployment goals. While our accomplishments were extraordinary, the ongoing health pandemic and the impact it has had on our country weights heavy on our hearts.
Let me discuss the highlights for the year. Our FFO and AFFO increased 26% and 19% year-over-year, respectively. The growth was driven by acquisitions made in the first half of 2020, higher rents achieved through our leasing activity and nonrecurring income, which Jorge will cover in greater detail. Operating metrics were strong. Highlighted by a record leasing volume of 12.5 million square feet. This was approximately 1/3 of our core portfolio, and importantly, minimized the leasing role to just 10% in 2021.
We collected more than 98% of rent due in 2020. Not only is this a testament to our real estate professionals, but also our credit risk management that reviews the financial health of customers before we sign the leases. Our balance sheet remained strong, and we had an active 2020, which resulted in the lowest cost of debt in our sector. We also raised $730 million of capital through a subscription rights offering and a green bond issuance. The latter being the first of its kind for a real estate company in Mexico.
We acquired 5.3 million square feet throughout the year for $438 million. These properties fit our investment strategy of being located in irreplaceable locations, built to the highest standards and leased to some of the best global customers. While we have consistently delivered strong results even during this time of uncertainty when our strategy shines brightest.
Our performance demonstrates the importance of focusing on both consumption and manufacturing as well as owning modern facilities in key markets, close to the end consumer, all of which is why we have been able to outperform the broader economy. Consumption and manufacturing exports continue to drive demand for logistics real estate, a trend we expect will continue in 2021.
Far exceeding our expectations, demand outpaced supply by more than 2 million square feet, resulting in vacancy declining to 3.3%. Logistics demand came in at 17 million square feet, flat to the prior year. Supply was constrained in 2020 with a lot bound limiting construction for several months.
In Mexico City, land scarcity and a lengthening environment process has limited completions. In our border markets, limited access to electricity has lowered new supply. Even Monterrey, which historically has had a higher supply was [ down ].
For 2021, we expect a balanced market with a market vacancy remaining below 4%. The cumulative effect resulting in higher market rental rates. Now let me spend a few moments on what we're seeing on the ground. E-commerce, which changed consumer behavior around the world has become a significant driver of logistics demand in Mexico. Adoption was further accelerated by the stay-at-home economy. With the e-tail sales doubling as a percentage of retail sales to 8%, with e-commerce requiring 3x the logistics space with traditional brick-and-mortar retailer, the benefit to logistics real estate demand should continue for the foreseeable future.
We saw 2 of our largest e-commerce customers take additional space from us in Mexico City while they analyze expansion plans, which potentially would include leasing under construction projects from our sponsor.
Our third company known for grocery and everyday household products is also growing their e-commerce business and have discussed leasing more space with us. While those conversations are just starting, I believe it is a leading indicator of demand. Manufacturing remains an important segment, particularly as the broader economic weakened. Proximity to the United States and cost of labor has always been a key competitive advantage and is being further fueled by trade tensions, political turmoil and health pandemic all converging.
Evidence of near-shoring is real and will continue to grow. During 2020, we signed leases in Juarez and Monterrey with customers in the consumer electronics, sleek technology and furniture industries.
In other words, the tailwind's helping to drive FIBRA Prologis' outperformance have a lot more room to run. Before concluding, let me discuss our 2021 outlook. We are optimistic as we start the year. We're expecting a rebound in its economy, which should be another catalyst to an already strong business. Logistics real estate continues to be the favored asset class among investors. The combination of retail and office shutdown as well as the strong industrial fundamentals drove prices higher.
In fact, we saw meaningful cap rate compression in the fourth quarter, and we are optimistic this will continue this year. In operations, our focus remains pushing rent and maximizing lease term. However, our opportunity will be limited this year given the amount of leasing during 2020 and the available [ roll ]. On the deployment front, we expect to be active and opportunistic. In addition to assets from the Prologis pipeline, we're exploring third-party assets that align with our investment strategy. We view our balance sheet as a major competitive advantage. The flexibility we have allows us to play more often. Our team of real estate professionals proved why they are the best in class during 2020 with seamless execution despite unprecedented challenges.
Putting everything together, we are excited about 2021. Our hard work will carry forward this year where we expect our cash flow generation to be even stronger. We are increasing our distribution 11%, sharing our success with our investors.
In summary, we remain committed to creating value for certificate holders, our portfolio is resilient and built to outperform in any environment. With that, let me turn the call over to Jorge.
Thank you, Luis. Good morning. Thank you for joining us, and I hope everybody is staying healthy. Before commenting on our results, I would like to note that this quarter, we modified our reporting format of our financial statements. We are now showing revenue of positive numbers and expenses at negative numbers. Let me begin with our financial results. On a nominal basis, FFO for the quarter was $32.3 million or USD 0.038 cents per certificate. Which represents a 1.7% increase per certificate when compared to the same period last year.
On an annual basis, FFO was $134 million, which entails benefits related to realized gains from early [ investments ], withholding tax and VAT reimbursement, which had a positive FX impact. Excluding these nonrecurring benefits, FFO was $126 million or 17% higher than 2019. AFFO was $23.7 million for the quarter, an increase of more than 69% on a nominal basis when compared to last year.
On an annual basis, AFFO was $98.5 million, an 18% growth if compared to 2019. This increase was a result of income generated from acquisition of [indiscernible]. As well as nonrecurring realized gains -- realized -- recently made. Moving to operational metrics. Leasing activity was 1 million square feet for the quarter, which fully, occupancy, 70 basis points higher from the third-party in -- from the third quarter to 97.1%. On a year-over-year basis, occupancy was down 50 basis points as compared to the same year last year.
Net effective rent change on rollover increased 12.4% on a trailing 4-quarter basis, which is impressive given we leased 12.5 million square feet for the year. This will result in higher cash flow from organic growth and value creation for our portfolio in 2021.
Cash same-store NOI was negative 1.2% for the quarter and negative 4.7% for the year. The decline was mainly driven by concessions related to longer lead term and a weaker peso, partly offset by higher rent. To give you some perspective, same-store NOI on net on a net effective basis which averages the effect of free rent over the entire term of the lease increased 2.5% in the same period.
Moving to our balance sheet. Let me go over the main metrics of the quarter. Leverage was 39%. Weighted average debt growth was 3.4%. Weighted average maturity was 7.1 years. I am very proud of what our local of team accomplished in 2020 from a capital market perspective. We were able to bring approximately $730 million between equity and debt in a very challenging year.
As a result of our hard work, we have an even stronger balance sheet with respect to liquidity and debt maturity. In terms of guidance for 2021, we used an FX rate of 21.5 peso for each U.S. dollar, which is the level we have pegged for earnings. As a reminder, we used put options to protect it from the downside that participate in all of the upside till the peso strengthens.
We -- on the capital deployment front, we expect to acquire between $100 million and $200 million and expose between $20 million and $30 million. Putting all this together, we are setting our full year FFO per certificate rents between USD 0.017 and USD 0.175, which represents a 3% increase year-over-year or an 11% increase if you exclude the net nonrecurring benefits received in 2020.
Given our good operating results, flexible balances from our business, we are increasing our distribution by approximately 11% to reach USD 0.1075 per certificate, which represents approximately 5% in yield in dollar terms at current environment. All these together made FIBRA Prologis an attractive investment from a risk and growth perspective. With that, let me turn to the operator for Q&A.
We're ready to begin Q&A.
[Operator Instructions] First question, we have Sheila McGrath from Evercore.
Your sponsor has experience around the world in logistics and e-commerce. And I'm just wondering if you think things will play out similarly in Mexico, logistics, real estate or any lessons learned with last-touch facilities that might change your strategy in Mexico. And where does your sponsor view Mexico in the rankings around the world? Is it among the top market globally?
Thank you, Sheila, and good to hear you. So yes, the sponsor, in fact, has its earnings and its report last Tuesday, so a couple of days ago, and we saw the results there. So what I can tell you, what is happening around the world is logistic real estate remains the main preferred sector in real estate. We've seen very strong operating metrics, occupancy. We see a strong rate change, a good balance between supply and demand. And mostly a business that has been very resilient in -- especially in this COVID time, and this is not only in the U.S., but this is mainly across the different regions.
E-com has been a major driver around the world. And in the U.S., e-com sales represent 20%, and this is compared to Mexico. This has fueled the last-touch strategy around the world, and that has been accelerating. Certainly, the level of service that economies provide with a 20% penetration has to be higher.
Mexico, 8%, it's in a lower pace, but increasing. So as e-com sales become larger as a percentage of total sales, the last touch initiative will be keeping on increasing. And I would say that Mexico is one of the best positioned in terms of yields. So Mexican cap rates are among the most attractive if compared to the ones globally.
And lastly, values around the world have increased and cap rates have decreased as a result of these trends.
Next question, we have Nikolaj Lippmann from Morgan Stanley.
Congratulations on the numbers. My question is on pricing in the Mexico City metropolitan area. I'm sorry if I'm being so specific, but I think on Page 49 in the release, you have this overview of regional trends. If I compare fourth quarter to the third quarter, it looks like Mexico -- peso pricing went from, on a per square foot basis, 130 to 120 and kind of flat in dollar terms at 602. The same time, we can see that you're very active on the leasing front. So you could have had a couple of 3 months. There's a lot of things going on.
Can you help us to handicap the pricing trend numbers in Mexico City? And also maybe address what you're expecting in terms of that area for the next couple of years?
Nikolaj, this is Hector. Good morning, everyone. Thank you for your question. The way we look at leases is always based in dollar terms. The difference that you are referring to is linked to the FX fluctuation between the third quarter and fourth quarter. On the third quarter, FX was at 22 pesos and for the fourth quarter, the average was more on the 20 pesos less. This is why you see this differentiation in pesos because it's just an FX conversion. What we saw in 2020 in Mexico City was a very strong demand, important net absorption.
In Mexico City, rents are trended to be in pesos, and we see between 10% to 15% increase in peso leases. In dollar terms, our rents remain probably flat, and you need to -- you may think incorporating this analysis the FX volatility. The way we see Mexico City market, we see our position as leaders in this market. We have important projects. The sponsor has important projects in the pipeline. There's no way Mexico City rent would go downwards. Mexico City is going upwards because of the increase of demand due to this online sales that are going to keep on growing.
And we do expect additional demand from the current players. And from those players that are rapidly catching up, understanding that they need to increase their online business. As of today, Mexico City, hand by hand, with Tijuana, are the 2 best markets that we have. We are positive about it.
For the next question, we have Francisco Chavez from BBVA.
Congrats on the strong results. My question is regarding the acquisitions and divestments of assets implying your guidance for this year. Can you give us some color on when can we expect the acquisitions to materialize and in which markets? And also, if you can give us some color on the asset sales, please?
Thank you very much, Francisco. So it's time to play offense, we are in great shape. During 2020, we prepared the company for growth and to give us flexibility in comparison to the competition. Our loan-to-value is 29%. We had enough capacity in our credit lines, and this is just a great shape. We have 2 sources of a center growth. One is the [ COD ] pipeline. So the [ COD ] pipeline is around 1.6 million square feet, around $150 million. So we will be acting in about half of that pipeline, which is refilled in Tijuana, Monterrey and Juarez. And this will be probably happening in the first quarter. Our sponsor will also put lengthy work, and eventually, this pipeline will grow. And of course, the sponsor pipeline is a source of competitive advantage.
And then we will be opening third-party sales. So CBRE estimated $900 million of [ divestment ] sales in 2020, and will be keep on growing in 2021. We believe some institutional investors will close cycles and also prices to enter the balance sheet, and they will be selling some portfolios. So we will be receiving some of this in the market and, of course, participating, and we believe we'll be successful doing this.
I would say, evaluations, real estate is the preferred asset class, as I was mentioning, and it's a good time to tap into the markets. We believe those values are right in a relative basis. The dispositions that we are about to do are some properties in Guadalajara, which are in a park. We have an institutional seller interested in them -- interested on buying them. And this transaction should be happening before the end of the first quarter.
Next question, sir, we have Andre Mazini from Citigroup.
Luis, Jorge, Hector and Kosta. So the question is on -- so the retention rate was a little bit down compared to what you had in the rest of [ the month ]. But on the other hand, [ food ] and occupancy was up consistently since the second Q of 2020, right? So can we describe the occupancy going up and retention rates not as high as in the past as new tenants coming in? And if that's the case, I mean, there's new customers, would they be mainly from near-shoring e-commerce, as you just mentioned, or flight to quality?
And then a second quick one on the same-store cash NOI. Which also have been increasing since the second Q. Can you describe in same-cash-NOI should lower free rents on new leases. I mean, it's a tight market. So I would imagine maybe the market is converging to lower free rent.
I will take the first part of your question, Andre. The way we look at retention is always compared to occupancy and to rent growth. I think that [ hard ] To be concerned when you have a low rotation is when you are losing, importantly, occupancy and when you are habiting -- and when you are having negative rent spread.
In our case, our retention of 89%, it is above 80%, which is the benchmark that we regularly have. And if you compare this retention, with the important rate change that we experienced, as Luis mentioned, 12.4%. I think that we're in pretty good shape. And actually, what we are doing is getting more value from our properties. This increased the asset value of the properties. Nearshoring is a phenomenon that we're experiencing now in our own portfolio. In this quarter, we were able to close 2 important transactions, one of them in Juarez and another one in Monterrey. And even though we need to mention that an important demand or near-shoring has to do with companies willing to own the real estate I think that there is an important driver for us, as landlords, trying to lease with the good institutional companies, these facilities. It's a new type of companies. You need to play smart as the structure in the transactions, but we do feel that this is going to be an important driver on our other markets that the 3 of them at 100% occupancy.
Well, Andre, this is Jorge. I hope you're okay with all this pandemic and everything. It was hard for me to hear well your question on same-store cash NOI, but what I heard, I think, it has to do regarding with reaching NOI this year and related to free rent, given the concessions or what happened last year, derived from the high-volume of renewals that included free rent. That free rent is burning off in 2021, a part of it. And that's why same-store cash NOI, we are projecting a higher number or we are guiding to a higher number than what we have in 2021. So the question is regarding the [ branch ] here will turn out, most of it, in this year, 2021.
Next question, we have Vanessa Quiroga from Credit Suisse.
My question, the first one is regarding occupancy guidance, it's a little bit down. Can you tell us what markets are driving the lower expected occupancy, which is still strong, obviously, but just curious about what markets you expect to decline in terms of occupancy? And then on the acquisitions, I was wondering regarding your expectations on leverage, do you expect to fund most of those with debt? And up to what level are you willing to bring leverage for your balance sheet?
Vanessa, I will take the first part of your question. Yes, I will try to answer the first part of your question. The occupancy levels that we are experiencing, it's very natural to have a frictional vacancy. I understand that we -- and I would love this to happen, to take it from 97% to 98% to 99% and even to go to 110% occupancy but that's impossible.
Above 95%, what happens is the nature of the portfolio, if you have some customers expanding, you have some customers within Guadalajara and Monterrey. Guadalajara and Monterrey are consumer markets, which will have good participation. And we are seeing institutional players that, in the past, we're leaving this market to local competitors appearing in Guadalajara and in Monterrey.
Our strategy is different. We try to capture the high-quality customers that are ready to pay a higher lease because they have their product and hydro service.
Guadalajara is strong in the market in which rents are not growing, rents are keeping flat because of this additional supply. But we do see as well, it's facing difficulties or being weak. We see inclusive Reynosa, that it's going to be very active this year, and it's going to be presenting new development starts. So on the overall, I feel very positive about this. I will pass over to Jorge to answer the second part of the question.
It's Jorge. Just clarifying our quick point on occupancy. Remember, we guide for year-end occupancy. Occupancy we'd have because of movement with the dynamic portfolio to have someone leaving at the end of the year. And that's why we'll have, as a matter of fact, both --we feel strong about occupancy during the year.
That said, in terms of your question on acquisitions, our target leverage or our feeling, if you may, from our own perspective, is 25%. We can use that for the acquisition we have.
Next question, we have Gordon Lee from BTG Pactual.
Couple of questions related on the -- to the capital deployment topic. The first, I guess, is a little bit of a follow-up from Vanessa's question, Jorge, which is -- and you discussed this a little bit in the supplementary information in the remarks there, but any way the LTV levels that you would be comfortable with? And maybe perhaps if you could also remind us what LTV covenants, if any, you have on your outstanding debt?
And then the second question is more on cap rates, which is it looks like cap rates may be marginally compressed very little during 2020 in the M&A market. And I was wondering what the view is on how much more cap rate compression you think we can see in 2021?
How are you? Thank you for this question. Let me answer a part of your question. And you can see it on the Page 17 of the supplemental financial information, you will see the debt covenant that we have under the bond that we have -- that we break out here. So I won't go through the numbers but pretty comfortable vis-a-vis what we have in our bond covenants.
Regarding your question on the changes on CMBB. As I said earlier, our internal target is 35% for internal ceiling. The changes on the liquidity front, there happen to have liquidity of one on a 12-month forward basis from an 18-month forward, which was the period. We are going to keep those from an institutional perspective as this have to be approved at the holders' meeting.
I think there's just going to be other sectors, I mean disruption. Automatization is going to be happening and what I can say is that, Floyd, being the major logistics supplier in the planet, we have a direct access to the global customers, which are the ones, really, setting the trend on the evolution of the product. I wouldn't be surprised if in the future, buildings are more vertical than horizontal. That's going to happen within a few years. And I think that it will be evolving for good.
And again, this is Jorge. And just adding to what hector said, I think that EAG is going to be [ big ] in this sector or leader. Just to give you a couple of examples, solar lighting on our energy figure footprint in Mexico and other parts of the world. Efficient lighting, LED lighting, more certificates from Beaumont, which has to do with operations or lead and have to do with the development or design. You will see that from a real estate perspective and add to that community workforce that we have with -- working with the communities, a better governance, more FCPA kind of training for everybody. Now that's something that is in everybody's mind. Those kind of things are going to evolve.
And that will also include data mining. I mean, look at the real estate as a sample of that. We get -- you get a lot of data from our customers, and that's something that will also be evolving in the future. We see that -- we see those trends around the world.
Next question we have, Froylan Mendez from JPMorgan.
So your BPS guidance implies a lower payout ratio of around percent 2019. So can you guide us through your rationale to retain AFFO? And if this implies, you could start to be active in the Biden market? And additionally, how should we think about the breakdown between capital returns and fiscal returns for your 2021 distribution?
Thank you, Froylan. Very good question.
Apologies. I think the main speaker line got disconnected. The backup is now open. Mr. Girault, your line is now open.
We are waiting for management to answer, right?
Yes...
Apologies. They're going to go to the -- we have another line. Apparently, they've been disconnected, so they're going to go into that other room. One moment.
Hello, Froy?
Yes, we can hear you now.
Sorry. I don't know where we dropped off.
Jorge, I couldn't hear anything after question.
Yes. As soon as Luis said, that's a good question, it got cut off.
Okay. So I'll let Luis go through it.
Okay. So I'll -- so 2020 cash flow was strong. FFO grew 25%, AFFO grew 18%, and we're expecting growth of cash flow in 2021, mainly generated by internal growth of leasing volume and rent change of 2020, which will be in 2021, the additional revenues generated by the acquisitions. And very importantly, the lowering of our cost of debt to 3.4%. So we are increasing our distribution 11% and sharing this cash flow without our investors, which I believe very few companies are doing this after the pandemic.
So we will continue to share this additional cash flow with our investors, but we don't want to take our payout ratio to the maximum of 95% as we would like to retain some flexibility because we can see some unevenness in the economy. We still are in some red lights. We have the Mexican election, and we would like to retain some flexibility should the environment change.
And regarding your question on the breakdown between digital and return on capital, Froy. Let me just say that for 2020, everything -- 100% of the distributions that we're going to take that we [ wouldn't ] make is -- that come from taxable profit. And that has to do with the FX, obviously, or has a bigger -- a big component.
In 2021, the quick answer to your question is it depends on where the FX ends. There has been some changes on the physical front regarding rules, so we have to adapt to those. So I cannot answer that part. If the peso stays where it is, we're going to have the intuition that it's most likely fiscal return. If there is a devaluation, there could be some capital return depending on the size of the devaluation and the new fiscal rules. But that's the best answer I can give you in 2021.
Next question, we have Pablo Monsivais from Barclays.
I have a quick one. I mean it's kind of a follow-up to Nikolaj's question. You discussed that market dynamics in Mexico's very is strong. The demand is performing quite nicely. And we have seen demand, in general, performing very nice over the last few years. And it seems that new supply has been subdued because of U.S. election, Mexican elections, you name it. But going forward, do you think that finally, competition will become harder in a sense of, I don't know, private competitors putting more land and more projects as trying to capture some additional demand from e-commerce players?
Or how do you see new supply for the next 2 years? Because supply has been kind of slow and demand is quite strong. But probably, if demand continues to be strong, it's likely that some other competitors will start to build new properties. How do you see the supply side of the equation?
I apologize, sir, their backup line that disconnected again. We are working to reconnect them now.
Ladies and gentlemen, please stand by. We are having technical difficulties. The conference will resume shortly. Mr. Girault, your line is now open. Please proceed.
Yes. Thank you. Sorry, Pablo, we didn't hear your question. I apologize for these IT issues.
Okay. Well, basically, Jorge, I was asking about the supply side of the question. Demand has been strong and supply, over the last few years, has been kind of weak or more cautious. But probably that will change for the next 2, 3 years or probably longer. How do you see supply, for example, in Mexico City, looking back?
Supply, like, it's really complicated because land scarcity is at peak. It's practically impossible to get a large piece of land to develop with the kind of activities that the market is reflecting. We will see, as well, a complexity, an additional complexity that has been enhanced with the pandemia and all the entitlement process take much more [ planning ]. It's becoming more expensive. So I think that you need to think in advance, you need to plan according to these conditions that I have just explained.
Our sponsor has very clear big challenges and actually has been working with large components of land in several years ago. And I think that once again, we will be better positioned in competition. The supply, to the defend the product in the kind of part that competition -- that the market is reflecting. These are same conditions. The complexity that the -- both the markets are presenting in more linked to landed scarcity in markets like Tijuana and to energy supply. Energy supply has become an important challenge in a development.
So on the other one, the barriers to supply additional space are there, therein to recognize that there's interest from many investors to jump into this market. But all these processes take long periods of time. And during acquisition opportunity, that important amount of money there , #1. And they do, a little bit, calc, to get to the final project the way we -- there's not a lot of players that have this kind of view.
Next question. We have Armando Rodriguez from Signum Research.
Just a quick one. And considering your sponsored comments recently that inventory to sales ratio should drive leasing demand, at least for this year. I would appreciate your view on this, particularly on Mexico numbers.
Armando, this is Jorge. Can you repeat your question? You cut off and was hard to hear.
Sure, Jorge. Just considering your sponsor comments recently that inventory-to-sales ratio should drive demand, particularly in the U.S. I would appreciate your view on this in Mexico. That's my question.
Okay.
Yes. This question is a good question. I think it's fundamental of our business. Last year, we experienced, in our fixed market, a net absorption of almost 18 million square feet, while in supplies supply was only 15.8%. So I do see that the restriction or the challenge is, which is a fundamental part of our business, we only participate, as a reminder, in those markets that have real influence. So they provide the ability to have a challenging supply and this help us to be able to drive rents up.
Mexico is really very challenging. Tijuana is very challenging. We are working in all of the fixed markets or replenishing our landbank. Guadalajara and Monterrey are experiencing new competitors that additional supply, but that supply is not necessarily where the main market is. So it's like a Chess game between supply, the right product in the right location.
Monterrey and Guadalajara, they have different markets. And [indiscernible], for example, which is where we have 100% of our holdings, with the market where land is more constrained where 80% of the activity takes place. So this is a supply and demand game is linked to the ability to increase rents and to increase the value of our assets on the overall.
Armando, you are thinking about our customers' inventory. I think what will happen is that they want to be more resilient, will increase their inventory. And this should increase the demand for space. So I think we are seeing a very active market as we begin 2021 with good demand which is mainly a perspective on this -- our clients increasing their inventory levels.
I am showing no further questions at this time. I will now turn it back to Mr. Luis Gutierrez.
Thank you, everyone, for joining to this call. 2020 was a transformational year for FIBRA Prologis. We meaningfully increased our footprint while delivering on key internal growth objectives. We have an exceptional balance sheet that allows us to play offense. We expect 2021 to be even better, and we are excited to show you what we can do. Thank you very much. And please feel free to reach out should you have any questions. Have a good day.
Thank you, presenters. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day.