| TEXAS SNAPSHOT, FEBRUARY 2011
RIO GRANDE VALLEY
The Rio Grande Valley, now doing business as Rio South Texas, offers many choices for global business locations and generous economic development incentives. With a dynamic, young labor force, great weather, low cost of living and plenty of recreational activities year round, the Rio South Texas region is an ideal location for companies looking to expand or relocate.
Two nations, one region, many choices is the focal point of the Rio Grande Valley located in South Texas. While commercial real estate activity continues to be down overall in the Rio Grande Valley, the market remains one of the strongest in the nation. According to the Milken Institute, the McAllen-Edinburg-Mission, Texas regions ranked 4th in the Best Performing Cities 2010: Where America’s Jobs Are Created and Sustained.
The Metropolitan Policy Program (MPP) at the Brookings Institution regularly lists the 20 strongest major metro areas in the U.S. It looks at fundamental economic issues: economic activity, housing and employment and the McAllen-Edinburg-Mission areas earned a ranking in the Top 20 Strongest Metro Areas list. Our local colleges and universities are also feeling the growth. More than 29,000 students enrolled in South Texas Colleges this year, a record high for the institutions and a 7 percent gain from last year.
There are positive signs that in 2011 big box users will continue to return to the market. Rooms-To-Go and Pappadeaux’s Seafood Kitchen both entered the market in 2010 and Bass Pro Shops announced it was coming to Harlingen with a projected fall 2011 opening. A recent survey of the top emerging restaurant markets in the U.S. conducted by QSR magazine and Pitney Bowes Business Insight ranked the top 40 cities for expansion, McAllen ranked No. 1 with Brownsville ranking No. 2 for medium markets
The office market is still dominated by healthcare and government agencies. 495 Commerce Center, a 110-acre master-planned business park, became home to its third GSA building (25,000-plus square feet) which opened in the third quarter of 2010.
With the opening of the newest international bridge in January 2010, the industrial market continues to gain momentum. The presence of maquiladoras provides considerable advantages to the economic environment along the border by increasing trade, generating employment and acquiring local resources.
Because of our unique location, we have close ties to the business community in Mexico and a proven understanding of the unique economics of the U.S./Mexico border area. NAI Rio Grande Valley is able to provide services to both international and domestic clientele.
— Mike Blum and Laura Liz Paz are brokers with NAI Rio Grande Valley.
Retail
The Rio Grande Valley market, comprised of the McAllen-Edinburg-Mission (MCA) and Brownsville-Harlingen (BRW) Metropolitan Statistical Areas, has a combined population of 1.14 million people and holds position as one of the fastest growing regions in Texas. Both metros ranked in the top ten of the fastest growing MSA’s in Texas experiencing population increases of 30 percent for the MCA area (ranked second) and 18.2 percent in BRW (ranked seventh).
In 2012, forecasts predict McAllen to surpass El Paso as the largest border metro area in the state. This rapid population growth, created by a combination of domestic and international migration to the area, has also been aided by job growth in the healthcare, manufacturing, education, government and service sectors. Expansion in area employment can be attributed to a variety of factors, including low cost of living and geographical proximity to Mexico. As a result, the MCA and BRW metros ranked first and second, respectively, in employment growth rates in Texas in 2010.
Retail sales per capita in the Rio Grande Valley have historically been nearly twice the national average, driven in large part by cross-border traffic from Mexico. While this traffic declined slightly in 2010 due to weakened global economic conditions and reactions to border violence in Mexico, activity should increase in the short term as forecasted economic improvement in both the U.S. and Mexico bring trade flows between the two countries back to their pre-recession levels.
Retail market conditions improved slightly throughout the Rio Grande Valley in 2010. According to the Texas Comptroller’s office, sales tax revenue increased in most of the communities in the Rio Grande Valley. Surprisingly, McAllen’s sales tax revenue, one of the few to decline, remains the largest sales tax generator in the Valley and the 12th largest in the state. Over the course of the past 12 months, the retail market in the MCA and BRW metros improved slightly as vacancy rates dropped 1.3 percent and 0.3 percent, while asking rental rates increased 3.69 percent and 5.44 percent, respectively. Limited development activity manifested in 2010 as the combined new construction deliveries for the year were only 121,440 square feet.
Additional signs of market improvement could be seen in the number of key retailers who either opened or committed to opening new stores as 2010 came to a close. These include Bass Pro Shops, Forever21, Ultimate Electronics, Hobby Lobby and dd’s Discounts, among others. The majority of these retailers leased existing big box vacancies that were created over the past few years and are emblematic of the flight to quality and value that has been witnessed in other retail markets across the country. Interestingly, most of these new openings were not relocations of existing retail outlets, but were new retail concepts to the market or additional locations.
While uncertainty remains with regard to the pace and strength of recovery in the Rio Grande Valley retail market, the increasing population, employment growth rate and improving consumer confidence should combine to generate significantly more development and leasing activity in 2011.
While leasing volume in existing projects should improve as retailers take advantage of the remaining vacancies created by retail store closings over the past few years, the major driver of new activity will be the return of retail development. Notably, several large anchored projects will break ground in 2011. These include, but are not limited to, Cielo Realty Partners’ development in McAllen, St. Ives Realty’s San Juan Corners shopping center in San Juan and KCT Ventures’ Cameron Crossing in Harlingen, which will be anchored by Bass Pro Shops. These projects will include anchor, junior anchor, small shop and pad site development and should lead to additional retail growth in their respective trade areas.
— John H. Wright, IV is an associate with CB Richard Ellis, Inc.
Sources:
- Moody’s Analytics, Precis US Metro, McAllen & Brownsville
- U.S. Census Bureau
- CoStar, The CoStar Retail Report, Year-End 2010 Report, McAllen/Edinburg/Mission & Brownsville/Harlingen
- Texas Comptroller’s Office
- Real Estate Center at Texas A&M, Monthly Review of the Texas Economy — December 2010 by Ali Anari and Mark G. Dotzour
©2011 France Publications, Inc. Duplication
or reproduction of this article not permitted without authorization
from France Publications, Inc. For information on reprints of
this article contact Barbara
Sherer at (630) 554-6054.
|
