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 Click here to view the full 2009 Year End Market Summary for El Paso, Texas and Cd. Juarez, Mexico.
El Paso, Texas
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Total Market Size:
Total Activity:
Gross Absorption:
Net Absorption:
New Construction:
Industrial Vacancy: |
54,230,000 SF
4,930,000 SF
2,146,000 SF
-701,000 SF
0 SF
14.2% |
Like the rest of the country, El Paso’s industrial market had a difficult 2009. Overall there were 2.85 million SF of plant closures across the city and the industrial vacancy rate climbed above 14%. Most of this negative activity was related to manufacturing operations in Juarez and the crossborder consolidation of plants as firms tried to weather the economic storm. During the last twelve months, gross absorption was 2.14 million SF, resulting in a negative net absorption of 701,000 SF market wide. This downward trend is likely to continue in the early part of 2010 as Jones Apparel Group closes their distribution center in Socorro, putting an additional 860,000 SF on to the market.
While the overall trend was negative, there were some bright spots in 2009. Activity among 3PL’s was strong and accounted for over 950,000 SF of absorption. Key transactions included leases from Penske, CEVA and Expeditors. We also saw activity from some operations linked to manufacturing in Juarez such as Venture Plastics and Plastic Molding Technology, but in general these were short term lease renewals under 3 years.
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While much of the industrial outlook for 2010 depends on what happens across the border in Juarez, there are some positive trends from last year that were unrelated to the maquiladora industry. Of the 2.14 million SF of absorption in the last twelve months approximately 1/3 were operations coming into El Paso to support the local market. This included Bradco Roofing Supply, American Tire Distributors and Dee’s Food Service among others. This certainly helped the city’s overall industrial market, but for 2010 and beyond we will need to see the levels of maquila-related investment experienced from 2005 through 2008.
We expect to see a slow first half of 2010 in El Paso. Companies will be able to meet any immediate increases in their production through the use of currently under-utilized space within their facility. The industrial market will not experience any significant positive absoption until firms fill up these “shadow” vacancies. Due to the large amount of quality vacant space across the city, lease rates will remain low throughout 2010.
Cd. Juarez, Mexico
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Total Market Size:
Total Activity:
Gross Absorption:
Net Absorption:
New Construction:
Industrial Vacancy: |
58,849,000 SF
2,502,000 SF
1,845,000 SF
-1,937,000 SF
585,000 SF
12.7% |
2009 was a tough year for Juarez. Manufacturing activity dropped significantly at the end of 2008 and remained depressed throughout the year. Job losses in the maquiladora sector topped 83,000 according to the data from the Juarez Maquiladora Association. Investment activity came to a virtual standstill with very few new projects over the past 12 months. The level of violence also surged, making headlines around the world.
While production and employment began to stabilize in the second half of the year, 2009 will be recorded as one of the worst years in the city’s history. Today we see several trends emerging that will impact Juarez’ manufacturing industry and real estate market in the year to come:
1) Realignment of global manufacturing will favor Mexico’s border region. The skilled labor pool, low labor costs, logistics advantages, supplier base and regional opportunities will continue to attract companies to Mexico. We expect to see a significant amount of site selection projects investigating Mexico during the first six months of 2010.
2) Continued violence in Juarez will redirect some investment. While many other locations in Mexico are experiencing violence, it is less than what we’re seeing in Juarez and not the focal point of national media attention. This will force many corporate management teams to select alternate locations like Monterrey, Reynosa or Nuevo Laredo until the violence subsides.
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3) Juarez and El Paso are positioned for a fast rebound. If the economy improves and violence subsides, the Borderplex is well positioned to be the largest beneficiary. Beyond the factors that favor the border region overall, transportation infrastructure in Juarez, availability of existing manufacturing facilities on both sides of the border and emergence of El Paso as a city of the future will result in a rapid recovery.
While we clearly understand the difficulties facing Juarez as we head into 2010, we do believe the coming year will be an improvement over 2009. We expect to see a rebound in maquiladora production levels, resulting in a stabilization of the real estate market in the second half of the year.
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