TEXAS SNAPSHOT, FEBRUARY 2006

Laredo Industrial Market

There has been renewed activity in Laredo's industrial market during the last 12 months with absorption in 2005 doubling what was seen in 2004, according to Edward Villareal, an associate with Grubb & Ellis|Best/White in Laredo. “Positive industrial activity levels will continue through 2006 and into 2007 as activity and demand continue to be extremely strong in the Mexican manufacturing sector,” he says.

Market-wide vacancy in Laredo currently stands at 6.9 percent, which is a 5-year low for the market. “Vacancies have decreased during the last couple of years based on the lack of new speculative product,” Villareal says. “In the last 12 months, vacancies have dropped more drastically because of the greater amount of activity in the market. In the next 12 months, vacancies will decrease further because of the increased activity levels as well as the lack of new speculative space available.”

Embarcadero Industrial Park has been the most active development in Laredo during the past couple of years. The park, which is owned and developed by Farias Development, will total approximately 800 acres. The development currently has approximately 800,000 square feet. “The quality of this development is unprecedented in the Laredo industrial market,” Villareal says. “The buildings' features — such as 24- to 28-foot clear heights, concrete tilt wall construction, 200-foot concrete trucks courts, and ESFR fire protection — and the architectural and landscaping aspects are among the standards that have been raised.”

Verde Corporate Realty Services, while being the newest developer in the market, is already one of the largest (owning and managing close to 1 million square feet in Laredo) and will continue to be a major factor in the leasing of industrial space, according to Villareal. The company does not have a single development in Laredo per se, but it does have several leased buildings in the market as well as a number of land sites for future development. “Verde Realty is one of the few Class A developers that will continue to build on a speculative basis, and that is key to the Laredo market,” Villareal says.

Most of the region's new industrial activity is taking place in North Laredo due to the proximity to the World Trade Bridge, the primary commercial crossing in Laredo. “While the land is controlled by few owners, the Northwest industrial submarket will be the market that will grow the most in the near future because of the zoning of industrial property,” Villareal says. “The access to major thoroughfares, Interstate 35 and Loop 20 are the other reasons for the substantial amount of industrial activity in North Laredo.”

Laredo is unique in its geographical location at the convergence of I-35 and Mexican Highway 85, and the city has become the port of choice as more than 40 percent of all goods that cross between the U.S. and Mexico cross at the port of Laredo. The port of Laredo was recently ranked as the fourth largest port in the United States. “Because of this need to get goods across the border, Laredo has become a major distribution center, and is thus dominated by warehouse and distribution centers,” Villareal says. “In relative measures, there is very little manufacturing, flex and other industrial space in the Laredo market.”

— Edward Villareal is an associate with Laredo-based Grubb & Ellis|Best/White.

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