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The Prospect for Major Retail Expansion in the Rio Grande Valley is Predictable

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Michael Blum, NAI Rio Grande Valley

Last summer, NAI Rio Grande Valley and Michael Uhrbrock, senior vice president of research at the University of Texas Rio Grande Valley, examined eight Rio Grande Valley cities to examine the history of retail sales between 2002 and 2014 and to forecast the future. The cities examined were McAllen, Brownsville, Harlingen, Edinburg, Pharr, Weslaco, Mission and Mercedes.

We were working on a piece for the Rio Grande Valley Partnership’s Economic Development magazine. What we learned is quite interesting and presents an unusual view into the future potential for retail expansion in the Rio Grande Valley.

Total retail sales in the eight cities increased $4.47 billion between 2002 and 2014. Forecasting the future required a view of low, median and high ranges of potential sales. Based on the high projections, it is anticipated that valley sales in these cities will increase by $13.68 billion between 2015 and 2030.

A number of factors go into the results, but several factors are expected contribute to the expected increases.

Growth in Many Sectors
With 1,450,000 residents, the population of the Rio Grande Valley today is larger than that of nine states. Forecasts show the population will grow to 2.5 million by 2040, which does not include the Mexican population just across the border. With that number included the region will grow bi-nationally to 7 million by 2040.
It’s common knowledge that retail follows rooftops. Major retailers expanding into all valley markets will continue unabated.

At the same time, growth in education opportunities is already happening with the merger of the University of Texas—Pan American campus in Edinburg and University of Texas at Brownsville into the University of Texas Rio Grande Valley. Further new education opportunities include the establishment of the UTRGV medical school and a Texas A&M University campus in McAllen.

In addition, South Texas College, with campuses in McAllen, Weslaco and Starr County, will have a combined enrollment of 40,000 by the end of 2017. Collectively, these institutional will transform the region in ways that were only dreamed of a few years ago.

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Continued growth in public and private hospitals and allied medical facilities across the valley has already attracted a vast number of medical professionals with high incomes. With the opening of the medical school in the fall, this will continue.
There are 12 international ports of entry in the Rio Grande Valley carrying over $41 billion in cross-border cargo truck trade. The Pharr Bridge is becoming the No. 1 port of entry for agricultural products from Mexico. Continued growth of U.S. and foreign manufactures into Reynosa, Rio Bravo and Matamoros is brisk. Together, these international activities have a major impact on all forms of regional growth patterns.

Sky-High Expectations
SpaceX designs, manufactures and launches advanced rockets and spacecraft. The company was founded in 2002 by Elon Musk to revolutionize space technology, with the ultimate goal of enabling people to live on other planets. After years of research and a competitive selection process, Space X began construction of its launch facilities in Brownsville. The first launch is scheduled for 2018. It is impossible to know how this will impact the valley, but expectations are high.

At the same time, efforts to bring LNG processing facilities to the Port of Brownsville are in the final stages. A large steel fabrication plant will be under construction soon that will employ more than 1,000.

South Padre Island remains one of the best resort locations in Texas. Beautiful white sand beaches, abundant hotel and condominium selection and improving family entertainment options like Schlitterbahn water park contribute to the demands for a second causeway, further enhancing recreational opportunities.

Eco tourism across the region will not only attract more visitors to the valley but will be a major source of increasing regional hotel occupancies.

In December 2013, Mexico changed its constitution, ending a 75-year monopoly of the state oil company, Pemex, and opening up oil and gas fields to foreign investment. Mexico estimates it will need more than 40,000 new wells to develop its virgin shale fields, with each well costing $10 million to $20 million.

Pemex, the Mexican state oil company, can’t afford to drill these horizontal, water-fractured wells, but Mexico desperately needs to boost its declining oil production. That’s why the country is trying to attract private investors. The Rio Grande Valley is at the gateway to the Burgos Basin oil patch. The future impact on the region is difficult to calculate today.

— By Michael Blum, Partner/Managing Broker, NAI Rio Grande Valley. This article originally appeared in the September 2016 issue of Texas Real Estate Business.

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