TEXAS SNAPSHOT, SEPTEMBER 2007

Laredo Industrial Market

Laredo, Texas, continues to be the second largest inland port (next to Detroit) and the fourth largest of all ports of entry in the United States, according to Edward Villareal, an associate with Best White Commercial Real Estate in Laredo. “It is the largest border crossing for goods coming from and going into Mexico,” Villareal says. “Almost 40 percent of all the goods transported between the two countries pass through the port of Laredo.”

Expectations for year-end 2007 in the Laredo industrial market are that net absorption will be equal to or better than the net absorption of 2006 (1.8 million square feet). “Through the second quarter of this year, net absorption was in excess of 900,000 square feet,” Villareal says. “That is very good activity considering the average year of net absorption in the Laredo market is 750,000 to 1 million square feet per year. Market-wide vacancy is 2.88 percent, a 10-year low.”

Another strong trend is that there are many more owner-occupied facilities currently under construction than the area has seen in several years. “The availability of inventory space and industrial land is limited,” Villareal says. “Barriers to entry for new developers are as high and challenging as they have ever been.”

There has been very little manufacturing activity in Laredo during the last several years as the area’s industrial sector has been dominated by logistics-type operations. However, the announcement that Eagle Cooper Tube plans to open a 500,000-square-foot manufacturing plant in 2008 should spur further manufacturing in the year to come. “That bodes well for Laredo,” Villareal says.

Several developers are consistently active in the industrial market in Laredo. Verde Realty, for example, owns more than 1 million square feet of existing industrial facilities in North Laredo, with concentrations of buildings in the Milo Distribution Center, Eastpoint Industrial Park and El Portal Industrial Park. “They also have a 260,000-square-foot inventory facility to be delivered within 60 days in the Eastpoint Industrial Park,” Villareal says. “In addition, they own 22 acres for future build-to-suits or inventory buildings.”

Embarcadero, an 800-acre industrial park with close to 1 million square feet, has contemplated building an inventory building of approximately 90,000 square feet, which might be available in mid-2008. “Its location is prime at the intersections of Mines Road and Loop 20 with land extending to Interstate Highway 35,” Villareal says.

The Killam family owns several thousand acres in the Laredo MSA and has developed the largest industrial park in Laredo, Killam Industrial Park. Currently, they have a 50,000-square-foot inventory building under construction, which is set to be delivered in the first quarter of 2008.

Due to the World Trade Bridge and nearby major thoroughfares, the majority of industrial growth has occurred in North and Northwest Laredo, and all signs point to that area seeing more activity.

With the growth of manufacturing plants in Mexico and as the demand for those goods continues to surge, the future of the Laredo industrial market looks very bright. “The only concern is the availability of industrial land,” Villareal says. “If users are not able to find land or buildings to accommodate their needs, they may look at other ports of entry to transport raw materials and finished goods between the U.S and Mexico.”

— Edward Villareal is an associate with Best White Commercial Real Estate in Laredo, Texas.


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