TEXAS SNAPSHOT, SEPTEMBER 2012

EL PASO RETAIL SNAPSHOT

The El Paso economy has witnessed recent advances, driven by expanded cross-border trade, a new medical school and significant expansion at the local U.S. Army base. The city’s per capita income is rising and the market is looking healthy, with a strong outlook for retail sales in the future.

Situated near the border of three states and two nations, the El Paso metro area totals 2.3 million people within a 50-mile radius. El Paso ranked No. 2 in 2011 Milken Institute’s “Best Performing Cities” index, which ranks metro areas on ability to create jobs and sustain growth.

According to a survey of retailers conducted by the City of El Paso, Mexican nationals, primarily from neighboring Ciudad Juarez, represent about 30 percent of all customers, with some retailers reporting up to 80 percent Mexican shoppers. Mexican nationals generate an estimated $1.5 billion in retail trade annually, and this significant buying power has created an estimated 3,800 retail jobs.

Rendering of The Fountains at Farah, a 600,000-square-foot power retail center under construction in El Paso by Dallas-based Centergy Retail.

El Paso is home to Fort Bliss, the fastest growing U.S. Army installation in the United States and the city’s largest employer. The post adds $5.7 billion in economic impact annually to the city. Fort Bliss is undergoing a major expansion that is expected to result in 34,000 new troops and 50,000 family members by 2013. Civilian employment supporting the new troops will increase by 3,600.

The El Paso market is made up of five key areas: West, East, Northeast, Central and the Lower Valley. Loop 375 wraps around the city and helps to connect all these areas. The East side is the hottest market for retail right now and is experiencing housing growth due to its proximity to Fort Bliss.

The multifamily housing market is strong in El Paso, with multifamily occupancy at 95 percent. The city ranked No. 20 for hottest multifamily markets in 2011, according to Multifamily Executive magazine. More multifamily developments will come on line in 2012-13, especially in the East and Northeast areas, to support the growth at Fort Bliss.

In recent years, there have been barriers to entry such as a lack of available critical mass retail development. Several new developments are coming on line in the next two to three years, and they will provide solutions to this pent-up demand. The City of El Paso is working closely with new and existing developers to attract major retailers and assist them in their expansions in an effort to enhance the quality of life by offering greater choices of dining, shopping and entertainment.

Two developments near Interstate 10 on El Paso’s affluent West side are expected to drive significant retail activity in this area in the coming years. Local developer EPT Land Communities is nearing completion of Phase I of Montecillo, which will include commercial, residential, mixed-use, school and park designs, and is expected to yield approximately 150 home sites. Montecillo will be the city’s first Smart Growth Code urban development, designed to be pedestrian-friendly and give neighbors a sense of community.

Adjacent to Montecillo is the 204-acre Aldea El Paso, or The Village at the Pass. The project from Albuquerque, N.M.-based developer Geltmore, LLC, is expected to open in 2015 and will combine more than 1 million square feet of retail and entertainment. The development will be anchored by Walmart, two hotels and more than 260,000 square feet of office space, with 1,245 new residential units of various sizes and types.

Across town on the East side, Dallas-based Centergy Retail has begun construction on The Fountains at Farah, a 600,000-square-foot power/lifestyle center that is expected to open in fall 2013. Located at the northeast corner of Hawkins Road and Interstate 10, adjacent to Cielo Vista Mall, The Fountains at Farah is bringing in national retailers from every category, from big-box to high-end lifestyle retailers, including 20 to 30 retailers and restaurants that are new to the El Paso market.

Certain areas of El Paso are experiencing low retail vacancy rates. Pad sites are being marketed as ground leases or build-to-suit, indicating the market is tight in these densely populated areas.

El Paso has seen high grocery volumes in regional trade areas. Walmart and Albertsons have been the market leaders in the grocery category, but with future growth, the area should experience more expansion and increased selections of quality natural, organic and prepared food options. Sprouts Farmers Market, Cielo Vista Natural Market and Pro’s Ranch Market are already tapping into this opportunity, and more are soon to follow.

Overall, El Paso is headed for strong retail growth during the next few years, driven by the growth at Fort Bliss and the increased buying power of Mexican nationals. With an additional 90,000 government-related family and ancillary personnel coming to El Paso, the growing economy in Juarez and 15 million Mexican nationals annually crossing the border into El Paso, there is nowhere to go but up.

— Susan Ridley, senior vice president for Venture Commercial, represented tenant Best Buy in their lease negotiations with The Fountains at Farah. Jessica Herrera is the former program administrator for City of El Paso’s Economic Development Department.

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