El Paso area in midst of record-setting warehouse and distribution construction boom
The El Paso area is in the midst of a record-setting construction boom of huge, multimillion-dollar warehouse/distribution buildings.
The boom is mostly fueled by the growing manufacturing industry across the border in Juárez. More companies are moving manufacturing from China to Mexico because of pandemic-related supply chain issues, said Bill Caparis, executive vice president at the El Paso office of CBRE Group, the Dallas-based global commercial real estate services company handling several of the new El Paso industrial projects.
“The more (manufacturing) space that gets leased in Juárez, the more demand we see in El Paso,” Caparis said.
Companies with plants in Juárez use El Paso as a warehouse and distribution hub. (A list of El Paso projects is at the end of this story).
The industrial space vacancy rates in El Paso and Juárez were at record lows at the end of the first quarter: 1.5% in El Paso, and just under 1% in Juárez, CBRE data show.
Another reason for the construction boom is pandemic-related supply-chain problems are prompting companies to warehouse more raw materials and finished products than prior to the pandemic, Caparis and others in the industry said.
"Just-in-time inventory was the mantra” prior to the pandemic, said Will Brown, managing partner for Sonny Brown Associates, an El Paso commercial real estate services company. “Now, suppliers and producers recognize the need to have more available inventory” and that’s increased the demand for warehouse space, Brown said.
The need for "safety stock to counter supply-chain disruption" also is fueling demand for warehouse space throughout the United States, a CBRE national report noted.
This is the best El Paso-area industrial real estate market and the most construction happening at one time that Caparis has seen in his 26-year real estate career in El Paso, he said.
At the end of the first quarter, El Paso’s industrial space construction was at a record pace with 11 buildings containing 4.2 million square feet of space under construction, CBRE reported. Seven of those buildings, with 2 million square feet of space, were speculative projects, meaning they were being built without signed tenants – the most speculative space construction built in El Paso at one time, the CBRE report stated.
That comes after a record-setting 2021, which included construction of the five-story, 2.6-million-square-foot Amazon distribution center in far East El Paso County. Amazon officials previously reported the facility was 625,000 square feet, which is only its footprint.
More: 2.6 million square foot Amazon distribution center is largest industrial building in area
Almost half of the square footage under construction in the first quarter is a giant distribution center being built by TJX Companies to supply some of its Marshalls clothing stores. CBRE had the building at 1.7 million square feet, but a TJX official recently told the El Paso Times it will be 2 million square feet.
Neither the Amazon or TJX projects are linked to Mexico.
In Juárez, industrial construction also is at a record pace. At the end of the first quarter, 24 buildings, most of those tied to manufacturing, with 5.5 million square feet of space, were under construction, CBRE researchers found. Seventeen of those buildings with 3 million square feet of space, were speculative projects.
El Paso had 63 million square feet of industrial space, including manufacturing facilities, at the end of the first quarter of 2022; and Juárez had 77 million square feet, most of that manufacturing space, CBRE reported.
Most of the new warehouse/distribution building construction is in far East El Paso because companies want to be near the Zaragoza international bridge, one of the nation’s busiest land ports for commercial, border crossings, and to be near the Interstate 10/Loop 375 interchange, key links for truck traffic. Some speculative industrial space also is being built in Santa Teresa, New Mexico — near El Paso's West Side — where a land port is located.
More: West El Paso's Montecillo continues growing with $80 million in new apartment construction
Recently completed speculative projects in El Paso are leasing quickly – mostly to logistics companies, those in the real estate industry reported.
"There’s a lot of pent-up demand for industrial space on both sides of the border," said Adin Brown, president of Sonny Brown Associates. “This area in my 38 years (in the commercial real estate business) had some nice increases in inventory at various times, but 2020 through 2022 is the most we’ve seen at one time. It’s exciting action."
CBRE’s Caparis doesn’t see the demand slowing down anytime soon.
“There doesn’t appear to be anything we can point to that will change this,” Caparis said. “Interest rates are continuing to rise now; obviously there’s all kinds of things going on around the world that leave a lot of questions. But with the supply-chain issues and the companies through their near-shoring efforts, we think the future for the Mexico markets and border markets will be strong for the foreseeable future.”
New industrial building projects
Some of the new warehouse/distribution projects in the El Paso area:
Constellation Trade Center
Three-building, 798,470-square-foot project expected to begin construction this summer on 52.3 acres next to the newly opened El Paso Logistics Center, near the Socorro school district football stadium in East El Paso. Constellation Real Estate Partners, a year-old industrial building developer with offices in Houston and Dallas, and a real estate fund managed by Dallas' Crow Holdings Capital are doing the project.
El Paso Logistics Park
The 59-acre park’s four-building, 514,135 square-foot first phase was completed in September. Most of the space has been leased to five companies, and a sixth lease is pending for the remaining space, reported a spokesperson for VanTrust Real Estate, a large Kansas City, Missouri, real estate development company overseeing the project. The two-building, 480,504 square-foot second phase is under construction. The park is between Mercantile Avenue and Paseo Del Este Boulevard in East El Paso.
Rojas East Distribution Center
The two-building, 369,310-square-foot project at 12590 Rojas Drive, near Eastlake Boulevard, was completed in July and has been leased to two companies. Dallas-based Hunt Southwest Real Estate Development Co., developed and owns the project.
Eastlake Logistics Park
Walls are rising on the six-building, 1.1 million-square-foot project at Emerald Spring and Rojas drives, next to the new Amazon distribution center in far East El Paso County. The three-building, first phase is expected to be completed by the end of 2022. Stonelake Capital Partners, a Dallas-based commercial real estate developer, is doing the project.
Pan American industrial park additions
Three warehouses with 304,303 square feet of space at 9577 Plaza Circle and 455 Pan American Drive in the Pan American industrial park, near the Zaragoza international bridge in the Lower Valley. Construction is to be completed in late 2022 and early 2023. The buildings are being developed by a joint venture of Boston's Equity Industrial Partners and New York's Raith Capital Partners on land it acquired in late 2019 along with 22 industrial buildings.
Americas Ten 2
A 168,000-square-foot building almost completed at 12290 Rojas Drive in East El Paso. The $14.1 million project, being done by EastGroup Properties, a Mississippi real estate investment trust and developer, is next to EastGroup's 98,000-square-foot industrial building opened 20 years ago.
Westpark Building 2
The 364,500-square-foot building in the Westpark Logistics Center in Santa Teresa, New Mexico, a part of El Paso's West Side industrial market, is expected to be completed in the third quarter of 2022. It's next to the 315,000-square-foot Westpark Building 1 completed in 2021 and fully leased. Blue Road Investments, a Dallas industrial land developer, is the project developer.
Vic Kolenc may be reached at 546-6421; vkolenc@elpasotimes.com; @vickolenc on Twitter.
This article originally appeared on El Paso Times: El Paso sees increased construction demand from Juárez, other areas
