TEXAS SNAPSHOT, APRIL 2006

El Paso Retail Market

The predominant trend within the El Paso retail community is ongoing development of unanchored strip shopping centers and the construction and planning of new community centers, according to Richard Amstater, partner with El Paso-based RJL Real Estate Consultants, a ChainLinks company. “Super Target recently acquired its first site in El Paso to complement three existing Target Greatland Stores,” he says. “Wal-Mart still dominates this market with six Supercenters opened, two Neighborhood Markets and more of both concepts planned. We expect a flurry of new activity with the rapid anticipated growth planned for El Paso.”

With the entry of SuperTarget in El Paso, a new 450,000-square-foot community center, El Paseo Marketplace, is under construction in East El Paso. “More than 60 percent of all the new housing growth in the city has been in this immediate area, fueling not just a new community center but a new The Home Depot location and numerous strip shopping centers as well,” Amstater says.

Central El Paso also is experiencing new retail activity. Simon Property Group recently completed a multi-million dollar renovation of its 1.1 million-square-foot Cielo Vista Mall, providing a brand new look and enhanced overall ambience of the shopping center. “Simon also added a new 14-screen Cinemark Tinseltown that recently had a grand opening,” he says. “Simon has been part of the El Paso community for more than 30 years and continues to reinvest in this market.”

Across the street from Cielo Vista Mall, a local investor has purchased a former manufacturing building with plans to complement the synergy of the high volume and traffic of Cielo Vista with a new retail project.

Development activity has increased in recent months, primarily on the east side of El Paso. Developers have built new retail centers to keep up with residential growth. “El Paso is expected to grow by more than 100,000 people in the next few years fueled by several recent developments, such as the Army’s decision to increase Fort Bliss by at least 20,000 additional troops and their families within the next 6 years,” Amstater says. “This will provide an immediate boost to the local economy of roughly $3 billion.”

There have been several announcements of major master-planned areas on all sides of El Paso. The Public Service Board, for example, has hired URS Engineering to assist in the master planning and auctioning of approximately 5,000 acres in Northeast El Paso. Hunt Building Corporation recently formed Hunt Communities and announced a master-planned community of 20,000 homes for 75,000 people on state land east of El Paso, and Southwest Land Development Services recently received approval for the annexation of 2,300 acres in East El Paso. Verde Realty also has plans for a master-planned community of approximately 21,000 acres in Santa Teresa, New Mexico.

There are very few national retail developers in El Paso, according to Amstater. “The dominant national developer is Simon Property Group,” he says. “Cypress Equities, a division of Staubach Companies, recently acquired Bassett Place, which will be adding a new 18-screen theater.” River Oaks Properties, a locally owned development company, is developing the new El Paseo Marketplace. River Oaks also will have six new strip centers under construction in all areas of El Paso. Another local developer, Mimco, is very active in the El Paso market with the expansion of Zaraplex on Zaragosa Road and numerous developments throughout the city.

El Paso is starting to see new, higher end retailers and restaurants enter the market, including Chico’s with two new stores, Banana Republic, Jos. A. Bank Clothiers, PF Chang’s China Bistro and numerous Starbucks Coffee locations.

Based on the recent activity fueled by low interest rates, there is more existing vacant space than at the end of last year, Amstater says. “Land prices for large developable retail tracts in the city continue to escalate, along with construction costs and rental rates,” he says. “Rental rates in the El Paso market have exceeded the $20 barrier and continue to rise.”

The east side market, particularly the intersection of Montwood Street, Loop 375 and Zaragosa Road, continues to see major retail expansion. “With the completion of Loop 375 in the coming months, this is the fastest growing corridor in the city. Expect to see major retailers announced at this intersection in the next few months,” Amstater says. “New retailers are looking at this market and we expect new announcements of major developments to occur in 2006.”

— Richard Amstater is partner with El Paso, Texas-based RJL Real Estate Consultants, a ChainLinks company.

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