By Josh Meredith, Director of Development, VanTrust Real Estate
Mexico and the United States share a 2,000-mile border and trade over $500 billion worth of goods and services each year, making it our country’s second-largest trading partnership.
Impressively, according to the Texas Comptroller of Public Accounts, over 20 percent of these exchanges are routed through the port of entry, El Paso, Texas. This movement has counted the El Paso/Ciudad Juarez (Mexico) region among the most important industrial centers in North America for years.
Although the El Paso/Juarez market has a long history of extensive commercial activity with more than 1,100 manufacturing operations, the region has remained under the radar and has experienced a traditional steady industrial growth for the past decade.
However, with undeniable strategic advantages and more than 300 Fortune 1000 companies in the El Paso/Juarez area, the past few years have attracted a growing number of developers looking to capitalize on the industry and distribution needs of the market.
With record net absorption and a remarkably low vacancy rate, the “Borderplex” is the market to watch as it is building a reputation not only as a competitive industrial hub, but also as a driver of some of the key global manufacturing trends.
With more than 2.5 million people living in the El Paso/Juarez area, the area has grown to become the world’s largest bi-national border community, according to El Paso County. Population and labor availability, coupled with a strategic geographic location, has motivated developers to move to the region.
Traversed by Interstate 10, the country’s fourth longest freeway, running from the Pacific Ocean to Florida, El Paso offers its commercial residents unmatched access anywhere in the country. In addition, the El Paso/Juarez region is served by rail lines, two international airports and five international crossings. The latter includes the Zaragoza Bridge, one of the busiest international trade points that distinguishes it from any other area of the country.
It’s important to note that businesses in the region also benefit from being located within Foreign Trade Zone (FTZ) #68, which encompasses more than 3,400 acres of El Paso and El Paso County. This designation offers tax and duty exemptions on eligible inventory to some of the largest companies in the world. Additionally, El Paso is known as the “Triple Freeport Community,” which offers a tax exemption from all local taxing agencies (county, school district, and city) for inventory located in Texas for a short period (175 days or less).
In the fourth quarter of 2021, the El Paso market saw its highest demand for industrial space since 2018. With more than 3.1 million square feet absorbed, the market surpassed its previous record by nearly 1.6 million square feet. In the same period, the market-wide vacancy rate fell by 40 basis points to 3.1 percent, according to CBRE research.
However, this demand has seen significant land restrictions in the region over the last year, causing commercial space availability to fall as the market hit record highs. This means that developers looking to get into the area will find it increasingly difficult to find locations close to the area’s strategic advantages.
VanTrust Real Estate recognized and capitalized on the upswing in the El Paso/Juarez market early on, becoming one of the first national developers to come to the region in recent years. In 2020, we broke ground on Phase I of a nearly 1 million square foot speculative industrial site – El Paso Logistics Park – specifically located just four miles from the Zaragoza Bridge and with direct access to I-10.
With expectations that the market will not grow until 2022, VanTrust has completed Phase I of its 59-acre logistics park in recent months and has already leased over 371,270 square feet to five companies serving the El Paso/Juarez markets. With only 142,865 square feet remaining in Phase I, we estimate the project will reach full occupancy in the coming months. This demand has allowed us to break ground on Phase II of the El Paso Logistics Park, which will add 483,300 square feet of space to the area.
By partnering with general contractor Jordan Foster Construction LLC, architects PSRBB Industrial Group Inc. and CBRE’s leasing team, VanTrust has been able to offer companies looking to enter the El Paso/Juarez market access to a business-friendly environment and position these companies on the dynamic market that characterizes the region. This is a trend that will continue to be seen in the area as developers migrate to West Texas and take advantage of a unique industrial center.
future of the region
As an early company in the El Paso/Juarez area, we have found that market demand will increase in the years to come as long as companies continue to recognize that the region is ideally positioned to serve as a strategic international distribution point.
As more companies seek to protect their supply chains and reduce taxes by relocating their operations to North America, the El Paso/Juarez market will not only feature growing manufacturing activity, but also last-mile distribution centers and strategic facilities dedicated to rapid time-to-market.
This trend, coupled with consumers’ growing reliance on e-commerce retailers, will attract developers to the region and propel the continued success of the El Paso/Juarez market well into the future.
— This article originally appeared in the April 2022 issue of Texas real estate business magazine