The southern New Mexico industrial sector remained strong in 2011 and we expect 2012 to be a year of continued expansion and growth. The largest concentration of growth in the industrial arena has taken place in Santa Teresa and the immediate surrounding area. The industrial market in this trade area has benefited greatly from its proximity to the border with Mexico and work done by Gov. Susana Martinez in attracting industrial tenants to the area. We have also seen an influx of manufacturing companies that moved their operations to Asia who are now looking to relocate back in North America, specifically to those trade areas that benefit from a geographic link to Mexico.
Large box property owners gained the most in 2011 with the recent expansion of companies and businesses locating in the area. In 2011 Alaska Structures leased about 350,000 square feet of industrial space on the west mesa in Las Cruces. The company occupied one of the last remaining big boxes in the market, leaving little available big box space in the greater Las Cruces market. While 2011 was a good year for large boxes, landlords for mid-size and smaller boxes felt the pinch as tenants were able to leverage higher vacancy rates to get lower per-square-foot rates and more tenant improvement dollars.
Specific to the Santa Teresa market, 220,000 square feet of industrial space has been leased since December 2011. With these recent transactions completed the Santa Teresa market, which contains 2,750,000 square feet of industrial space, has less than 50,000 square feet of vacant space, reducing the vacancy rate to less than 2 percent. Construction of new space is lagging behind demand, and this trend will likely continue as new projects and companies move to the area that require more space. Santa Teresa and the greater southern Dona Ana County area are excellent opportunities for industrial developers to bring new projects online in the coming years. Difficulty in financing has required that developers have users in tow for larger projects, and the rapid expansion of business in this area provides an opportunity to developers.
Continued Growth and the Need for More Space
In 2011 Union Pacific broke ground on a $400 million investment that will bring the company’s regional locomotive fueling station and intermodal freight yard to Santa Teresa. This move will create opportunities for companies to place distribution facilities in the immediate area and benefit from the Union Pacific rail lines.
The Santa Teresa Port of Entry will also receive a $10 million renovation in 2012. The money will be spent to improve the port’s attractiveness to commercial users by expanding the number of northbound lanes.
Foxconn, a Taiwanese-based precision industries company, has a 440-acre industrial complex on the Mexican side of the Santa Teresa Port of Entry. Their continued expansion and plans for the future add to the need for more industrial space in the greater Santa Teresa area. This continued growth and activity should bolster Southern New Mexico’s industrial market for the foreseeable future.
— Jake Redfearn, broker, NAI 1st Valley in Las Cruces