El Paso Industrial Market

Preston

High construction costs and slow (recent historical) absorption have limited the amount of speculative construction in most of El Paso, Texas, with the exception of areas adjacent to the newest ports-of-entry between the United States and Mexico, according to Brett Preston, a member of RJL Real Estate Consultants in El Paso. “The trends are for highly efficient, high clearance (more than 28-foot) buildings with secure truck courts and generous tractor trailer parking areas,” he says. “Also becoming popular are specific facilities for capital intensive specialized manufacturing operations.”

According to Preston, the Santa Teresa submarket of El Paso will see more than 21,000 acres under master-planned development over the next 20 years in conjunction with the recent announcement of a 900-acre intermodal rail facility being developed by Union Pacific Railroad that will house Union Pacific Railroad, FNM (Mexico) and Burlington Northern/Santa Fe Railroad. Also adding to the Santa Teresa industrial market, the 250-acre Bi-National Industrial Park and the 400-acre Verde Santa Teresa Logistics Park are being developed adjacent to the intermodal rail facility. In El Paso, the 170-acre Zaragoza Industrial Park is the closest industrial park in El Paso that is adjacent to the Zaragoza Port of Entry. Currently, it is being completed by Verde Realty Group.

The predominant areas of new development are concentrated on the peripheries of El Paso to the Northeast, East and Far West sides, according to Preston. “The availability of large tracts of land and the immediate proximity to the newest and most popular ports-of-entry with Mexico drive these areas,” he says.

Verde Realty Group, which is headquartered in El Paso, is one of the most aggressive and newest developers to the area. “Verde is a private company that has a mission statement to be a predominant industrial owner and developer on the U.S./Mexico border,” Preston says.

Industrial properties in El Paso are trying to attract a number of tenants, most notably automotive original equipment manufacturers (OEMs) and suppliers, call centers, data centers, suppliers to the twin-plant industry, and military and defense system testing and development, according to Preston. Regionally, Electrolux Corporation, which has absorbed more than 1.5 million square feet; Bombardier, which has taken approximately 500,000 square feet; Flextronics, which has taken 750,000 square feet in two plants; and Lexmark, which has absorbed 130,000 square feet, are a few of the companies that make up the growing tenant base in the El Paso area. In fact, there has been more net new manufacturing/assembly space absorbed on the El Paso/Juarez, Mexico, border in the last 24 months than any other city in North America, according to Preston.

El Paso vacancy rates for industrial space have seen a decline from close to 15 percent to approximately 10.5 percent currently. “This translates into about a 2.25 million-square-foot absorption,” Preston says. Juarez vacancy rates are solid at 6.5 percent.

New industrial space in the El Paso market will rent for $3.75 to $4.10 per square foot per year NNN. Second generation space is priced predominately between $3.25 to $3.50 per square foot per year NNN. According to Preston, new product will continue to drive up average rates because the costs associated with construction are not expected to go down any time soon.

“In the coming years, the areas adjacent to the newest ports-of-entry at Zaragoza and Santa Teresa will see the lion’s-share of development, growth and activity,” Preston says. “The demand for reliable just-in-time shipments is critical to these state-of-the-art manufacturing operations being run just over the border.”

— Brett Preston, CCIM, is a member of RJL Real Estate Consultants in El Paso, Texas.


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