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El Paso Retail Market Embraces Entertainment Concepts

Southwest-University-Park-El-Paso

The Chihuahuas, El Paso's Minor League Baseball team, won both their division and conference in 2016 and 2017. The success of the franchise has brought more people to downtown shops and restaurants, and prompted the owners to import a soccer team.

Compared to the four major MSAs in Texas, El Paso has often been overlooked by national and regional retailers.

But times change, and interest in retail real estate in West Texas is at an all-time high. Major retailers that have taken space in El Paso are experiencing steady sales growth and expanding their footprints.

Over the last couple years, we’ve seen new leases for major retailers, including At Home Furniture — which leased more than 100,000 square feet at its newest location — Ross Dress For Less, Tuesday Morning, Marshall’s and Sprouts Farmers Market, to name a few.

Scott-Walker-MIMCO-Inc

Scott Walker, MIMCO Inc.

Like the rest of Texas, El Paso’s economy is growing and strengthening. The city has posted a 3.7 percent unemployment rate to start the year, which is lower than the state (3.9 percent) and national (4.1 percent) averages.

The city’s population continues to grow, driven by downtown office development, greater military spending (El Paso’s resident military base, Fort Bliss, houses tens of thousands of active duty and reservist military personnel, their families and civilian workers) and a reduction in crime in Ciudad Juarez, the sister city located just across the border. These forces have  combined to imbue El Paso with a unique, bi-national flavor and identity that appeals to both locals and tourists.

Now more than ever, these economic and demographic factors are having visible impacts on El Paso’s retail market.

Entertainment Leads the Way

El Paso natives love their city. But for years, its entertainment-based retail scene has underwhelmed. That has changed in recent years with the arrival of the El Paso Chihuahuas, a Triple-A baseball farm team for the San Diego Padres. Games at Southwest University Park have heightened the retail atmosphere in downtown El Paso and become a major source of entertainment for both businesses and families.

Strong attendance at baseball games has generated greater spending at downtown retail establishments. In addition, the popularity of the events has prompted the owner of the Chihuahuas, Mountain Star Sports Group, to purchase another sports franchise. Beginning in 2019, El Paso will have a team from the United Soccer League, one step below Major League Soccer (MLS).

In addition, Dallas-based Topgolf recently opened a 65,000-square-foot venue within the Montecillo Development on the city’s west side. This location is expected to draw more than 450,000 visitors annually and to ultimately account for the creation of more than 500 jobs.

Flix Brewhouse, an entertainment concept that combines movie theaters with microbreweries, is opening a venue in El Paso in April 2019. Like Topgolf, the Austin-based concept is taking space within a larger entertainment destination — in this case, the 500,000-square-foot West Towne Marketplace on the city’s northwest side. Walmart anchors the development, which also houses the first Cabela’s location in El Paso. The outdoor sports and equipment store opened in September 2017.

Construction of new retail product is also on the rise, and sights are being set on entertainment-themed users. The developer of West Towne Marketplace, River Oaks Properties, is also developing Eastlake Marketplace, a 150,000-square-foot retail center on the eastern outskirts of town. That project is slated to break ground this winter and will be anchored by a Cinemark. River Oaks is also developing another 100,000 square feet of new retail space along the Zaragosa Corridor in the Far East submarket.

We see a stronger presence of food- and entertainment-based anchors in El Paso’s stabilized retail properties as well. MIMCO recently acquired Montwood Mall, a 178,000-square-foot shopping center located on the city’s east side. Montwood Mall is anchored by an Albertsons and a Premiere Cinemas, which gives the center strong co-tenancy and the ability to attract a wide range of users.

Hotels Along for the Ride

This growth in experiential, entertainment-based retail is also drawing more tourists to the city — from both sides of the border.

Aloft-Hotel-El-Paso

The growth of entertainment-based retail in El Paso has become a catalyst for development of new hotels, such as Marriott’s 89-room Aloft concept in downtown.

El Paso’s hospitality market is the most obvious beneficiary of the city’s new, entertainment-based allure. There is tremendous buzz about the 500-plus hotel rooms that will be coming on line in downtown El Paso over the next 12 months.

New players to the El Paso hotel scene include Marriott International, which is opening an 89-room Aloft within the historic Bassett Tower, and Marriott’s Autograph Collection, which is opening at the site of the old Camino Real Hotel.

The historic Plaza Hotel, which has been decommissioned for nearly three decades, is also undergoing a $78 million renovation. According to the El Paso Times, the property will be remodeled into a 131-room boutique hotel with an adjacent 540-space parking garage. The latter element of the project truly speaks to the rising population density of downtown El Paso.

Final Thoughts

By embracing and promoting entertainment-themed concepts, El Paso’s retail market is proving its ability to hang with the larger markets.

El Paso’s retail sector will also benefit from improved infrastructure, specifically the completion of the $97 million streetcar project. The project will create an 4.8-mile route that will connect the downtown area to the University of Texas at El Paso (UTEP). The streetcar project is expected to be  a major driver of multifamily growth, which retail development tends to trail.

Expect this market to display steady growth in the coming years as it benefits from this new breed of tenant, as well as from its proximity to Mexico and its membership to the economically thriving state of Texas.

— By Scott Walker, executive vice president, MIMCO Inc. This article first appeared in the April 2018 issue of Texas Real Estate Business magazine. 

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