TEXAS SNAPSHOT, AUGUST 2009

Rio Grande Valley Retail Market

Randy Summers of Davis Equity Realty in Weslaco, Texas, answers our questions about retail activity in the Rio Grande Valley.

TREB: What major trends are affecting the Rio Grande Valley retail market?

Summers: Major trends affecting the Rio Grande Valley are the same trends affecting the rest of the nation: the economy. Location does have its benefits and the Valley, being so far away from Washington, seems to be buffered as to the severity of the downturn in the economy.

TREB: What sort of retail activity is taking place in the Valley?

Summers: Retail activity in the Rio Grande Valley continues to expand, albeit not at the pace enjoyed over the past 5 years. Sales tax revenue for the entire Rio Grande Valley is about the same as last year, but some individual cities are down 8 to 10 percent while others, such as Weslaco, Mercedes and Edinburg, are up 8 to 12 percent.

TREB: Have any major tenants opened new locations in the marketplace?

Summers: JCPenney and Lowe’s Home Improvement Warehouse are under construction and will open in Weslaco in October and November, respectively. Panda Express will open in McAllen by year’s end and has plans to open five to seven units in the Rio Grande Valley. Rooms To Go is under construction in McAllen and will open in the third quarter. CVS/pharmacy has entered the Rio Grande Valley market this year and has five locations under construction and/or opened. Walgreen’s, which controls the market share in this area with 13 locations, has a little more than a handful on the way.

TREB: Have any major tenants left the market?

Summers: Fortunately, no major tenants have decided to pull out of the Valley (except your national home builders such as KB and Jim Pulte). Visit any Walmart, Sam’s Club or Target on a weekend and it looks like Christmas is just around the corner.

TREB: What types of retailers are most actively leasing space?

Summers: The most active retailers leasing at this time are some of your budget tenants like Family Dollar, Dollar Tree, Dollar General as well as some of the soft good stores such as Ross Dress for Less, Marshalls, Bealls, and Melrose. Fast food operators are doing well and beginning to “kick the tires” for new locations as soon as financing is freed up.

TREB: Are there any major retail projects affecting the market?

Summers: Any major retail projects planned that had any breath of life have been stopped due to the economic situation. Walmart recently completed and opened a new store in Penitas, Texas (just west of Misson, Texas); SDI Development is completing the JCPenney and Lowe’s development in Weslaco, Texas; and First Hartford Development is beginning the second phase of the Shoppes of Rio Grande in Edinburg, Texas. Simon Properties is almost complete with Palms Crossing in McAllen, Texas; the Chelsea Development’s Premium Outlet Stores in Mercedes, Texas, completed its third phase this year; and Davis Equity Realty is completing leasing on the Walmart Supercenter-anchored Trenton Town Center in Edinburg and the Lowe’s-anchored Harlingen Plaza in Harlingen, Texas.

TREB: What cities are hotspots?

Summers: The entire Rio Grande Valley continues on a positive trend. There are naturally hotspots when you have such a large encompassing area. Weslaco, due to its central location of the Valley, continues to see positive growth and an increase in sales tax revenue. As both ends of the Valley continue to expand, growth toward the middle is natural. Lower land costs and a favorable tax rate help as well. Edinburg is growing as a natural expansion of the McAllen area and increase of the medical community. In the lower Valley, Harlingen and Brownsville continue to grow but not at the pace the rest of the Valley is experiencing.

TREB: Overall, what are your thoughts on the current state of the market?

Summers: I see the market in a slight decline or hovering pattern for the Rio Grande Valley. Although it has slowed some, the Mexican National shoppers still drop considerable dollars into the economy of the Rio Grande Valley. With development, the industrial market still continues to grow and, as soon as financing is available, I know all markets will begin to improve. 

— Randy Summers, CCIM, is sales manager commercial and sales/retail for Davis Equity Realty in Weslaco, Texas.

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