Long-time El Paso residents frequently hear people talking about the good things happening in our city. To be sure, El Paso is an enigma and a contradiction — a big small town with its own identity.
Cultural, economic, social and ethnic differences are comfortably accommodated in a “mi casa es tu casa” openness. Contrary to our “wild west” reputation, El Paso ranks as one of America’s safest cities by size.
The closest major city to El Paso is Ciudad Juarez, a city of 1.5 million people just across the Rio Grande River in the Mexican state of Chihuahua. The economies of the two cities are inextricably linked and create a major trade area on the southern U.S. border with Mexico. Roughly 30 percent of El Paso’s retail sales come from Mexican shoppers who also access educational institutions, medical services and professional services on the U.S. side.
Gary Sapp, Hunt Cos.
American and multinational manufacturers employ more than 200,000 people in Juarez and rely on El Paso’s transportation and trade infrastructure. The expansion of both trade and interdiction at the border has generated thousands of new federal agency jobs paying wages above the city’s median incomes.
Apartment development and ownership in El Paso are dominated by local and regional capital rather than institutional and public companies. Bohannon Development, Cullers Properties and Richard Aguilar’s EPT Properties have developed more than 2,500 units over the last four years. The largest project, EPT’s Montecillo, features nearly 800 new units in west El Paso, where rents are hovering around $1.70 per square foot for premium units.
In addition, the Meyers Group is developing a 29-story tower with a hotel on its lower floors and 250 multifamily units on the upper levels, the first multifamily tower built in the city since the early 1970s.
Affordable housing development is led by IBI and Tropicana, which together add several hundred Low Income Housing Tax Credit (LIHTC) and mixed-income units annually.
Military Drives Demand
With its 30,000-plus active duty soldiers, their families and the attendant civilian workforce, Fort Bliss represents a solid base of employment. About 60 percent of those soldiers live in the community rather than in on-base housing.
El Paso’s relative affordability makes renting and buying attractive options. Periodic troop deployments cause ripples in demand, but they are short-lived and shallow in nature.
Fort Bliss recently underwent a $6 billion capital investment via the Base Realignment and Closure Act, which facilitated construction of the $1.5 billion William Beaumont Army Hospital.
In addition, the opening and growth of Texas Tech’s Paul Foster School of Medicine and the Gayle Greve Hunt School of Nursing have bolstered demand for multifamily and single-family product. These two ground-up institutions have been responsible for the recruitment of many physicians and scientists to El Paso.
Retail Chips In
El Paso hasn’t seen the rapid repopulation that other urban centers have experienced, but there is a slow and steady movement back to the rich architectural environs of the downtown area. And thanks in part to a thriving retail sector, lofts and apartments are commanding rents above developers’ pro-formas and more capital is moving into the core.
Hotels, bars, restaurants and entertainment venues are both leading and following the trends. The rooftop bar and pool of the Hotel Indigo, which opened last year, has become a popular hang-out. The historic conversion for the Aloft Hotel is also expected to be complete by year’s end.
In addition, many first-to-market tenants with national scope, such as Whole Foods Market, are opening their first locations in El Paso.
River Oaks Properties is seeking tenants for its 500,000-square-foot West Towne development that can open in the fall. The property includes the first Cabela’s store in the area. The 600,000-square-foot Fountains at Farah project has stabilized and is drawing regional shoppers. A Topgolf location is under construction in west El Paso and slated for a November opening.
Other driving forces behind multifamily growth include a new $97 million rail trolley system linking the border, downtown and medical/university areas, which will open in 2018. The Southwest University Baseball Park, home to the El Paso Chihuahuas, has also become an immediate sensation and draws crowds beyond the community’s expectations.
After a few robust years that coincided with the build-up at Fort Bliss, apartment starts have returned to the historic average of about 1,000 units annually. Occupancies are in the low ‘90s and top-of-the-market rents are pushing $1.50 per square foot.
While other communities took a deep dive in 2008, El Paso was buoyed by the growth of Fort Bliss and residential speculation that hadn’t taken off in the metro. El Paso’s stability is a function of heavy public employment base and the region’s unique dollar/peso hedge.
The two currencies are never completely in sync, and when the peso is overvalued, retailers in El Paso experience strong results while manufacturing in Juarez slows down. Conversely, when the peso is undervalued, Mexicans’ purchasing power is constrained, but labor costs in the manufacturing sector become more competitive.
So while there’s a continuing rebalancing underway in El Paso, there’s no big boom and no big bust.
— By Gary Sapp, development president of the Southwest region, Hunt Cos. This article originally appeared in the September 2017 issue of Texas Real Estate Business magazine.