A booming Juárez industrial real estate market helped fill more El Paso warehouse space last year — bringing El Paso’s industrial vacancy rate to its lowest level in several years.

“Demand for warehousing (in El Paso) is back to where it was five years ago,” said Mike White, managing director of the El Paso office of CB Richard Ellis, a national commercial real estate firm.

Little new construction helped get more existing warehouse space filled, moving the industrial real estate vacancy rate for the El Paso area from 15.6 percent at the beginning of 2006 to 11 percent at the end of the year, White said. That rate is well above the national average of around 8 percent, but back to a more normal level for El Paso, he said.

About 6 million square feet of the El Paso area’s 53.6 million square feet of industrial space, including space in Santa Teresa, was empty at the end of last year, according to a report done by White’s office.

Joaquin Orozco, director of research and marketing for Grubb & Ellis-Best/White, another El Paso commercial real estate firm, said, “Growth in Juárez is phenomenal and it’s feeding into the El Paso market.”

Juárez’s industrial real estate vacancy rate increased slightly from 6 percent at the end of 2005 to 6.3 percent at the end of last year, mainly because of newly constructed space built on speculation, White reported. A report by the national real estate firm Grubb & Ellis estimated the Juárez vacancy rate at about 8 percent.

Whatever the vacancy rate, Juárez was the hottest industrial market in Mexico last year, and more of the same is expected this year, White and others said.

Leading the way in Juárez, White said, was Electrolux’s construction of about 1.4 million square feet for a washer and dryer factory and warehouse expansion and an additional 500,000 square feet for a supplier campus for its plants, including its refrigerator plant.

In El Paso, two of the biggest leases came at the mammoth 1-million-square-foot warehouse in Socorro once solely occupied by electronics manufacturer Thomson.

Werner Co., which manufacturers ladders in Juárez, leased a 375,000-square-foot space in the Thomson building, now known as the Americas Logistics Center, and Ryder Logistics leased 200,000 square feet in the building, White reported.

David Conn, director of corporate logistics for Pennsylvania-based Werner, said the company decided it needed a warehouse and distribution center near its Juárez plants to fill customer orders in the Southwest.

“Our product is expensive to ship. It’s better to stop across the border (in El Paso) and then fill customer orders (rather) than taking it further away” to Werner’s other major distribution centers in California and Kentucky, he said. Werner’s Socorro center now employs about 60 people, Conn said, and more are to be added.

Werner didn’t have many choices for buildings in El Paso with at least 300,000 square feet, Conn said.

“There were some other better deals for older buildings. We’re pleased with this deal. We got a (lease) at, or slightly below, the (El Paso) market rate” for a Class A facility, Conn said.

Lease rates for El Paso industrial space range from around $3.10 to $3.95 per square foot, well below rates in larger U.S. cities, White said. In Juárez, lease rates run around $4.50 to $5.25 per square foot, White said.

Jerry Ayoub, president of Five Star Development, which owns and manages 6 million square feet of industrial space in El Paso, including the Americas Logistics Center, said Five Star stopped building new warehouse space in El Paso about three years ago while it filled vacant space. It has about 500,000 square feet of vacant space, most of it in three East Side buildings formerly occupied by Media Copy, he said.

“Construction costs have gone up 50 percent” from about two years ago, and property taxes have gone up substantially, Ayoub said. Rents for new buildings will have to be more than $5 per square foot to make them financially viable, he said.

Ayoub said he expected the El Paso market to continue to improve because “the economy across the country is improving.”

David Majors, vice president and market officer for Verde Corporate Realty Services, which built three new industrial buildings in the Lower Valley and Santa Teresa last year, hasn’t yet determined whether it will add new construction projects this year.

“Costs are going up, so we have to look at the viability of doing other buildings,” Majors said.

Verde owns and manages about 2 million square feet of industrial space in El Paso and Santa Teresa, and also has industrial space in Juárez.

A 2007 forecast by Grubb & Ellis predicts that El Paso’s industrial real estate market will “outperform the past five years.”

“The combination of Fort Bliss population growth and Mexican manufacturing recovery should be able to drive the market and create the demand needed to see the rise of new construction projects in the region. Annual rents are expected to increase with the growing demand and the tight market status to approximately $4 per square (foot),” the forecast said.

In Juárez, Grubb & Ellis expects Juárez’s industrial building boom to continue in 2007 as “manufacturing grows and more organizations look to Juárez for new locations.”

CB Richard Ellis’ market report projects that El Paso’s industrial leasing activity will remain steady this year with some new construction. In Juárez, it expects “leasing and sale activity to be strong, but slightly lower than we saw in 2006.”

Source: www.elpasotimes.com

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