TEXAS SNAPSHOT, JULY 2008

El Paso, Texas Office Market

Preston

High construction costs and slow absorption have limited the amount of speculative office construction in most of El Paso, with the exception of medical developments near the new hospitals and surgical centers. The current trends are for highly efficient, high-profile buildings with plentiful parking and state-of-the-art amenities. Energy efficiency is also a high priority, but the cost of construction has delayed many plans to upgrade to better office space.

The predominant areas of new development are concentrated on the peripheries of El Paso to the northeast, east and far west sides. The availability of large tracts of land and the immediate proximity to the highest population centers and employers are what is driving this development.

On the east side, Sierra Providence Health Network is completing a new 110-bed, general acute-care hospital that opened at 3280 Joe Battle Boulevard at the beginning of June. A planned expansion will accommodate 290 beds. Adjacent to the hospital, Trammell Crow Company is developing a medical office building. The company is one of the newest and most aggressive office-specific developers to locate in El Paso.

In the downtown market, Borderplex Community Trust is extremely aggressive and is active in acquiring downtown properties for redevelopment. Mills Plaza Properties also has undertaken some significant redevelopment projects in downtown El Paso. The company is redeveloping the Plaza Hotel, a 19-story building designed by the famous architect Henry C. Trost. Mills Plaza Properties also is redeveloping the Anson Mills Building, one of the first cast-in-place concrete buildings built in the United States.

No major tenants are absorbing the majority of office space, as the El Paso office market historically has been comprised of local users and employers. One of these local users is ADP, which has taken 150,000 square feet on Resler Drive, adding 1,028 jobs. Empire Direct also has leased 40,000 square feet on Lee Trevino, bringing 700 jobs to the market.

The range for rental rates in El Paso is $17 to $20 per square foot per year triple net lease (NNN) for new space and $12 to $15 per square foot per year NNN for second generation space. New medical space is renting for $17 to $22 per square foot per year NNN, and older medical space ranges from $16.50 to $18 per square foot per year gross.

The citywide vacancy rate is 20 percent for office space, with downtown at 22 percent. Medical space vacancy citywide is approximately 15 percent.

In the future, downtown will be an area to watch because of the exciting buildings being redeveloped. The developers that are active downtown are spending significantly to ensure that the projects are successful.

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

Mills Plaza Properties Plans District to Restore Downtown El Paso’s Vibrancy Mills Plaza Properties recently unveiled plans for the Mills Plaza District in downtown El Paso, Texas. Focused around three historic buildings: Anson Mills, Centre Building and Plaza Hotel — all designed by renowned architect Henry C. Trost. The district will comprise office, restaurant and retail components. Mills Plaza Properties is redeveloping the Anson Mills Building in downtown El Paso, Texas, as part of the Mills Plaza District. The district also will include the Centre Building and the Plaza Hotel. The 12-story Anson Mills Building was built in 1911, and, at the time, was one of the largest all-concrete buildings in the United States. As part of the project, this structure will feature a full restoration and renovation. The completed building will feature premium office space, as well as ground-floor restaurant and retail shops. The Centre Building currently houses the offices of El Paso Electric Company and Western Refining, and a restaurant for the first floor is in the works. Redevelopment plans for The Plaza Hotel, which was the first high-rise Hilton Hotel when built in 1929, are still in the early stages, but will center around potential projects including a boutique hotel, residences, office space or a combination of the three. Mills Plaza Properties is working with the City of El Paso to close the adjacent block of Mills Avenue to auto traffic, making it pedestrian-only. The area will feature outdoor dining, trees, benches and a venue for public art. Washington, D.C.-based Martinez & Johnson Architecture and local firm Waters Design Group helped Mills Plaza Properties in the development of the district plans. — Lindsey Walker

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