Record-High Quarterly Absorption Leads to More Spec
The lack of supply along with a healthy demand from logistics companies in El Paso are placing upward pressure on lease rates and developers with surplus industrial land are capitalizing on this phenomenon.
EL PASO, TX—Hanson Asset Management LP is bullish on the El Paso market and with good reason. The city is the in-bound/out-bound stronghold for manufacturing plants in Mexico and all the while, has a lack of industrial supply.
On the heels of the success in its first spec industrial development, Hanson will continue building in the form of a second spec building. And, it is ready to begin construction on two additional spec buildings next door for future expansion requirements once the second building is leased up, GlobeSt.com learns.
Hanson has broken ground on Hanson Spec Building B at 9581 Joe Rodriguez Dr. The building will be located one block from the Zaragoza International Bridge on Loop 375.
Arturo De la Mora, senior associate, and Christian Perez Giese, senior vice president/director with CBRE in El Paso, are representing Hanson Asset Management in marketing this space.
“The lack of supply along with a healthy demand from logistics companies looking for industrial space in El Paso is placing notable upward pressure on lease rates across the city,” De la Mora tells GlobeSt.com. “As a result, developers with surplus industrial land, like Hanson Asset Management, are in a unique position to develop inventory and capitalize on this opportunity.”
This will be a 125,646-square-foot class-A speculative industrial building available for leasing in July 2019. There will be a truck court that can be fenced and secured for C-TPAT compliance along with 53 trailer storage spaces on site.
“What is unique about Hanson Spec Building B is that, aside from being the only speculative industrial building in El Paso, the developer paid close attention to the characteristics that are in most demand by the users of this market,” De la Mora tells GlobeSt.com. “Hanson Spec Building B has a functional clear height, ESFR sprinkler system, LED light fixtures and a secure truck court with overflow trailer parking. These features do not exist in any competitive building available today. It is also next to the main international port of entry.”
There are several factors coming into play that are driving spec space requirements, says Perez Giese.
“El Paso is the in-bound/out-bound stronghold for manufacturing plants in Cd. Juárez, Mexico. The strong demand in the Juárez/El Paso region is powered by solid economic fundamentals in the US, and more clarity about NAFTA’s fate and the economic policy changes from the new Mexican government,” Perez Giese tells GlobeSt.com. “We have also witnessed demand from companies with a presence in China who are seeking to mitigate risk associated with the trade tensions between China and the US by reducing their footprint in China and growing their presence in Juárez.”
Third quarter net absorption in the industrial market doubled from the second quarter, surpassing the 2017 total annual net absorption by 50,000 square feet with a record high quarterly absorption, according to the CBRE third quarter industrial report. The market-wide vacancy rate fell by 110 basis points quarter-over-quarter and 70 bps year-over-year, making it the lowest vacancy rate recorded for the industrial market, says CBRE.
The market-wide average asking rate also increased by $0.12 per square feet compared to second quarter 2018, making it the highest market-wide asking rate recorded. Class-A and B asking rates also had quarterly growth and set new record highs.
The market registered more than 1.8 million square feet of activity and 29 transactions. Slightly more than 50% of total activity was through new leases and class A accounted for 95% of the quarter’s net absorption, according to the report.