The need for storage and distribution space for the variety of fruits and vegetables imported from Mexico has long been a driver of industrial demand in the Rio Grande Valley (RGV). Overall industrial occupancy is on the rise throughout the region — about 92 percent in the Greater McAllen Area — and the role of agriculture is becoming a major part of it.
The agriculture industry has fueled rapid growth in the RGV city of Pharr and continues to bolster its economic prosperity today. As a global agricultural powerhouse, Pharr is home to a variety of thriving businesses in the agriculture industry. The Pharr-Reynosa International Bridge represents the sixth-largest land (in the United States and currently processes more than $30 billion in international trade on an annual basis.
Michael Blum, NAI Rio Grande Valley
The most influential element behind this uptick has not been agrarian, financial or demographic, but rather infrastructural and on the Mexico side of the region.
The Baluarte Bicentennial Bridge, a 3,700-foot cable-stayed bridge completed in late 2013, provides direct access from the Pacific coast city of Mazatlan to the inland metro area of Durango. From Durango, product can be transported directly to the Mexico border city of Reynosa, which has a thriving industrial sector as the “last mile” of distribution before the product enters the U.S.
Construction of the bridge has shortened by four to six hours the travel time for produce en route to Reynosa, shaving $500 to $1,500 off of truck transportation costs per load. Consequently, more overall product is coming in, driving up demand for warehouse and distribution centers in Pharr and surrounding communities.
Along with Nogales, Ariz., Pharr is the largest American port of entry (POE) for Mexican produce. In 2015, 11,760 produce-laden truckloads came through Nogales compared to 10,988 for Pharr, a difference of 772 truckloads. In 2016, the difference between the two cities shrunk to 480 truckloads as the viability of the bridge became more widely recognized.
The volume of truckloads coming through all RGV POEs increased by 7.4 percent between 2015 and 2016. Though we’re only halfway into 2017, a similar rate of year-over-year increase is expected, with much credit being owed to the construction of the Baluarte Bridge.
Competition Heats Up
According to Floyd Adcock, a research fellow at Texas A&M, Nagoles and Pharr alternate as market leaders in the importation of Mexican produce.
“Nogales is about to enter five to six months of really low volume, while Pharr will pretty much maintain activity similar to its first five months,” says Adcock. “Nogales is king for about six months while Pharr is king for the other six months, so it depends on who has the best performance during their respective reigns.”
A new venture in McAllen may have a huge impact on these numbers. ScanTech Sciences Inc. has started construction of the first electronic cold-pasteurization (ECP) food treatment center in McAllen, which will treat produce travelling to and from the US and Mexico. A 100,000-square-foot facility is scheduled to open during the fourth quarter of 2017 and be fully operational by the first quarter of 2018.
In addition, more than 500,000 square feet of warehouse facilities are in some stage of development within the McAllen MSA, driven by logistics requirements of 230 Maquilas in the Reynosa area and by increasing agricultural imports.
Another factor driving growth is legislation regarding overweight trucks that was passed two years ago. Overweight trucks from Mexico can now come across the Pharr-Reynosa International Bridge and use designated routes to reach their intended warehouse destinations in Pharr, McAllen and Mission.
Mexico offers greater weight limits for trucks than Texas does. In Mexico, cargo can weigh as much as 125,000 pounds; in Texas, the limit is 80,000 pounds. Under House Bill 474, Mexican truckers crossing at Pharr no longer have to unload one-third of their cargo in Reynosa, but can instead roll on through to RGV warehouses.
Room for Growth
The Pharr Produce District, a 300-acre area that serves as the center of activity for produce storage and distribution, allows for rapid inspection of all produce entering or exiting the United States. Opportunities for industries that complement Pharr’s Produce District are numerous. Whether you’re a grower, broker, distributor or an owner of a refrigerated shipping company, there is plenty of room for expansion and growth in every aspect of this market.
— By Michael Blum, partner/managing broker, NAI Rio Grande Valley. This article first appeared in the August 2017 issue of Texas Real Estate Business magazine.