FEATURE ARTICLE, OCTOBER 2011

BREAKING GROUND ON THE BORDER
El Paso’s newest shopping center development reflects the market’s unique retail environment.
John Nelson

Rendering of the 600,000-square-foot Fountains at Farah, a new shopping center in El Paso that is bucking national trends and has its official groundbreaking scheduled for November. Site work is already underway from the -developer, Centergy Retail, and more than 350,000 square feet within the project already has been leased.

The Fountains at Farah is the newest shopping center in El Paso currently in development, led by Dallas-based Centergy Retail. The roughly 600,000-square-foot property is expecting to open for business in fall 2013.

The development is an aberration from the norm for several reasons. For starters, the project is actually under way in the current economy. Across the nation, ground-up construction is in a lull, so a 600,000-square-foot property in development stands out. The headquarters for Farah Manufacturing Co. Inc. was previously on the site, but the building has been demolished recently to make way for the new shopping center.

Another distinction is that the property already has between 350,000 and 400,000 square feet of space designated for 45 tenants that have committed or signed letters of intent, all of which has occurred before the official groundbreaking in November. Among the committed tenants, more than 30 of these merchants do not have existing sites in El Paso.

“These 30 or so retailers have not only gotten the site approved, but they’ve also got the market approved in a place where they don’t have an existing store,” says West Miller, principal of Centergy Retail. “That’s almost impossible to do today. We’re about 65 percent pre-committed and we have not swung a hammer.”

The development is taking place in a submarket commonly referred to as a “borderplex.” Borderplex markets are cities that abut a border, namely the U.S.-Mexico border. Cities like El Paso, McAllen, Brownsville and Laredo are all considered borderplex markets.

One of the challenges borderplex developers face combatting preconceived notions of danger in their markets. Battling misconceptions is standard practice for El Paso developers nowadays. Miller explains that the violence south of the border comes up with every tenant unfamiliar with a borderplex market.

“They all ask ‘Why would we go to one of the most violent places to live in the world?’ We have to explain how the safety on the U.S. side is probably a benefactor of the violence,” Miller adds. “A majority of Mexican visitors come across the border for shopping.”

El Paso and Ciudad Juarez, Mexico, are so close yet so far apart. Both cities sit on the U.S.-Mexico border and have a little more than 3 miles between them. However, these cities could not be more different in terms of safety.

Juarez is largely considered the epicenter of the struggle between Mexico’s armed offensive and the drug cartels. The death toll for drug cartel violence in Juarez hovered around 3,000 in 2010 alone.

In stark contrast, El Paso is currently the Number 1 safest city with a population above 500,000 in the U.S., according to a Washington, D.C.-based CQ Press study. In fact, El Paso has been in the top three on the list since 1997.

The trade area for El Paso is approximately 3.5 million people, but if the Mexican state of Chihuahua is included, it’s upwards of 5 million, according to Miller.

Another peculiarity of the center is that the massive undertaking is happening in a city with a median household income of $36,078 in 2009, according to Census data.

“What you see on the cover is not what’s inside the book,” says Miller. “You cannot predict the sales volume based on household income.”

Retailers are seeing beyond the household income and are looking at the amount of traffic the borderplex market can bring, and that’s helped create the buzz around The Fountains at Farah.

Jack O’ Brien of O’Brien & Associates, a Dallas-based architectural firm, has designed The Fountains to be an all-outdoor retail environment with a parking garage, a 2,000 linear foot pedestrian walkway, a main event lawn and two terraced levels of shopping and dining.

Over the next several months, Centergy and El Paso-based RJL Real Estate Consultants will be busy leasing tenants and developing the property.

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