Texas Market Reports

El Paso Office Market Seeing Strong Absorption Through 2017

by Taylor Williams October 13, 2017

The border economy of the United States and Mexico is complex and deeply intertwined, to say the least. As such, the sister cities of El Paso and Juarez should be viewed as one economy. The region ended 2016 on a high note. According to the Federal Reserve Bank of Dallas, El Paso’s total nonfarm employment rose 1.7 percent during the year, besting the state average of 1.6 percent. The city added more than 5,000 jobs, with strong gains in service-providing sectors offsetting losses in the manufacturing sector. Leisure and hospitality led the way, according to the Fed, adding more than 1,700 jobs. At the same time, employment in Juarez’s manufacturing sector was up 5.4 percent from the previous year for a projected total of 263,000 new jobs. The downtown El Paso office market currently totals about 3.2 million square feet across 65 buildings. It breaks down into about 1.1 million square feet of Class A space, 1.2 million square feet of Class B space and 900,000 square feet of Class C space. For years, vacancy in the city’s Central Business District hovered around 20 percent, with virtually no new construction. But lately, conditions have dramatically improved. According to CoStar Group, …

October 13, 2017

Industrial Market Reports Texas Texas Market Reports

Institutional Portfolio Trades Dominate El Paso Industrial Investment Activity

by Taylor Williams October 6, 2017

With an inventory of about 63 million square feet, El Paso’s industrial market has played a pivotal role in the business of commercial real estate for the past 10 years. During that stretch, portfolio trades have come to dominate industrial transactions in this market. For example, Dallas-based Stonelake Capital Partners recently added to its holdings by buying four buildings from 5 Star Real Estate in Vista Del Sol East totaling about 567,000 square feet. Stonelake had entered the market several years prior after buying 11 buildings totaling roughly 1 million square feet in Butterfield Trail Industrial Park from two separate entities, Louis Kennedy and Lincoln Properties. Other defining examples of trades include the activity of IndCore, a Blackstone company that began buying Industrial real estate in El Paso in 2010. The company purchased 1.2 million square feet of assets from Prologis; 1 million square feet of space from Northwestern Mutual Credit and 1.2 million square feet of product from UBS. In addition, Allstate foreclosed approximately 500,000 square feet of the KASCO portfolio in 2011, which was re-sold to Covington Capital in 2015. CIII Capital Partners absorbed eight buildings totaling 900,000 square feet from Titan Industrial in 2012. Soon after, CIII …

October 6, 2017

Market Reports Multifamily Texas Texas Market Reports

Close Ties to Mexico Enable Stability in El Paso’s Multifamily Market

by Taylor Williams September 29, 2017

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. 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 …

September 29, 2017

Market Reports Retail Texas Texas Market Reports

Retail Tenant Mix Tops Mixed-Use Agenda

by Taylor Williams September 22, 2017

The terms “experiential retail” and “mixed-use development” are both thrown around heavily in the context of 21st century commercial real estate. As buzzwords for the changing landscape of retail real estate and encapsulations of the preferences of millennials, the terms are as popular in their usage as they are arbitrary in their application. Is an apartment building with a ground-floor restaurant or coffee shop really considered mixed-use? Is it actually legitimate to think of buying shoes or jewelry as an experience? The answer varies depending on who’s asked. But the fact remains that dividing lines between certain property classes are beginning to blur. Increasingly, office and multifamily projects are designed to include food, drink and entertainment options, which have become the only real common denominators among mixed-use projects. Given that those three facets of retail involve spending on one-time, consumable products and services, they have become the face of experiential shopping and spending. Integrating retail development into mixed-use projects, as opposed to standalone shopping centers or pad sites, comes with its own unique challenges: parking, noise restrictions and sourcing contractors that specialize in build-outs for multiple property types, to name a few. But developers realize that no matter how much …

September 22, 2017

Market Reports Retail Texas Texas Market Reports

Houston Retailers Respond to E-Commerce with Experiential Projects

by Taylor Williams September 15, 2017

For the past several quarters, the headlines of most CRE publications in Texas and beyond have proclaimed the end of retail as we know it. By now, we’ve all heard the stories and seen the writing on the wall: e-commerce will kill the shopping mall; large anchors that landlords have counted on for decades are shuttering and Amazon will be the end of the retail storefront. It’s a familiar tale as of late. But amid the doom and gloom of store closings, Houston seems to be staying on top of the trends, as its retail market remains healthy and appears to be moving ahead. In fact, despite losing over 70,000 oil-related jobs since 2015, Houston’s retail market remains one of the strongest in the country, posting an average occupancy rate of 95 percent. In addition, employment growth in the retail sector grew 5.1 percent in 2016 amidst the oil bust. Despite these strong retail indicators in Houston, the aforementioned market changes do have an effect on the retail environment. And while retailers themselves need to make the biggest adjustments, developers and landlords are not without their own challenges. Like the rest of the country, Houston retailers must figure out ways …

September 15, 2017

Industrial Market Reports Self-Storage Texas Texas Market Reports

Texas Flirts With Oversupply of Self-Storage

by Taylor Williams September 8, 2017

Speaking to a panel of real estate professionals in the 1980s on the dangers of overbuilding during a period of economic expansion, Dallas real estate magnate Trammell Crow offered lenders in the crowd a simple proposition: “If you stop lending, I’ll stop developing.” Thirty-one years later, the nature of that relationship has manifested in the Texas self-storage market. After minimal delivery of self-storage properties in 2012 and 2013, development began to surge in 2014. The Texas Self Storage Association (TSSA) estimates that there are now roughly 6,500 facilities statewide, and local sources concur that unit growth from 2014 to the present has been somewhere in the neighborhood of 350 new facilities per year. This development boom has occurred in the face of rising land prices, high property taxes and a constricting pool of skilled labor that has driven up construction costs. Overall economic growth is contributing to the concern as well. Lenders are still lending, thus developers are still developing, betting that the pent-up demand for self-storage properties in Texas still has some gas left in the tank. The bullish perspective on self-storage appears to go beyond the Lone Star State. Tennessee-based hotel data and research firm STR, which has …

September 8, 2017

Industrial Market Reports Texas Texas Market Reports

Baluarte Bridge Heightens Role of Agriculture In Texas’ RGV Industrial Sector

by Taylor Williams September 1, 2017

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. 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 …

September 1, 2017

Market Reports Multifamily Texas Texas Market Reports

Texas’ RGV Multifamily Market Attracts More Diverse Pool of Buyers

by Taylor Williams August 25, 2017

These days, first-time investors in the Rio Grande Valley (RGV) multifamily market are in for a bit of education. Misconceptions about the RGV are common due to the market’s actual proximity to the Mexican border and lack of proximity to other major metros, as well as the Trump administration’s dicey relationship with our neighbor to the south. In reality, the area is an attractive, stand-alone market filled with growth potential. Education, healthcare, retail, international trade, agriculture, oil & gas, port activity — the RGV has it all. Hidalgo and Cameron counties make up the fifth- and ninth-largest MSAs in Texas with a combined population in excess of 1.2 million. As a result, numerous investors from larger Texas MSAs, as well as out-of-state investors, are targeting multifamily opportunities in the RGV. ARA Newmark is currently marketing an 84-unit asset at a high-density intersection in the South Texas market. This metro is awash with high-end retail, healthcare and single-family developments and is thus attracting residents from a variety of backgrounds. Within the first two weeks of marketing, the asset drew six preemptive offers from a diverse buyer base that included two out-of-state buyers. The volume of retail growth in the Rio Grande Valley in recent …

August 25, 2017

Market Reports Retail Texas Texas Market Reports

Demand for Freestanding Emergency Rooms, Cold Storage Facilities Surges in Texas’ RGV

by Taylor Williams August 18, 2017

South Texas is in the midst of a growth spurt in the commercial real estate industry. Within the area’s retail sector, demand for freestanding emergency rooms and cold storage facilities is growing rapidly. Though atypical, requests for such spaces are becoming increasingly common in the Rio Grande Valley (RGV). An estimated 1.3 million people call the RGV home. Both Hidalgo and Cameron counties are equipped with multiple hospitals to meet the healthcare needs of residents. There are three freestanding emergency rooms in Hidalgo County and two in Cameron County, with several more currently in the pipeline. Three of the larger healthcare providers within the RGV — Doctor’s Hospital at Renaissance in Edinburg (the largest hospital in the area), South Texas Health System, which has five hospitals in cities McAllen and Edinburg and HCA Hospital in McAllen — all have plenty of emergency rooms to cover the cities they serve. Between Harlingen and Brownsville, both the longstanding Valley Baptist Health System and the newer Harlingen Medical Center have plenty of emergency rooms to handle residents’ healthcare needs. Despite having this many established players in the market, new operators of healthcare real estate like Neighbors Health System, which owns and operates Neighbors …

August 18, 2017

Market Reports Office Texas Texas Market Reports

Houston’s Office Market Rides Out Oil Downturn, Poised For Stability

by Taylor Williams August 11, 2017

Over the past few years, Houston’s diverse economy has proven resilient. This diversity helped the city weather a major drop in oil and gas prices that, during previous downturns, severely affected the office market. While Houston has taken its share of recent hits, it appears poised to move forward into a period of stability and steady growth. While most of Houston seems to be in recovery mode, the local office market historically trails the oil and gas industry and usually takes additional time to reflect the current economic recovery. Houston’s office market was hit hard by the downturn when oil prices plummeted at the end of 2014. Submarkets like the Central Business District and the Energy Corridor — where roughly half of the workforce belongs to the energy sector — were hardest hit. Firms in these submarkets suffered big layoffs and created large swaths of available sublease and direct office space. However, according to CoStar, tenants still spent more than $7 billion (larger than the GDP of 55 sovereign nations) on office space during the past year. What does this all mean for the office market? At the end of the first quarter of 2017, Houston’s direct vacancy rate was …

August 11, 2017

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