Border Talk: Real Estate's Still Strong

McALLEN, TX-As lawmakers grapple with ways to curb illegal immigration, leading executives from companies that have helped to build a large part of the maquiladora space say border fences and National Guardsmen aren't likely to impede development along the Texas-Mexico border. At least for now, it's business as usual.

"I think it's certainly not a disadvantage to us," Kent W. Newsom, vice president for Chicago-based Ridge Property Trust, tells GlobeSt.com. "The activity level we're seeing on the Mexico side of the border in Reynosa is very active and more so than it's been in years. Some think it's positive for us in our business because it won't make those borders so porous. But, it may be too early to see the ultimate fallout."

Just two months ago, Ridge Property Trust bought 71 acres to develop a 1.4-million-sf park in Reynosa for its first significant push south of the Rio Grande River after becoming one of the top developers of manufacturing and warehouse space on its northern banks. On the US side, Ridge's top team is in talks to acquire 30 more acres in McAllen's Sharyland Plantation, where it's developed 1.2 million sf in seven years.

The maquiladora industry has gained such strength that it's now part of Grubb & Ellis Co.'s market reports. "There's no idea how this will play out," says Robert Kramp, vice president and director national client services for Grubb & Ellis Co. "But, the industrial mega-complex along the Rio Grande border is vital to those economies. If you impose a very strict barrier between the two, you're going to stymie economies."

Kramp points out that the nationwide furor over Mexican immigrants does have upside. "At least for the first time, there is real dialogue that protecting the borders is not a state issue but a federal issue," he stresses. "It's too early to tell the ramifications on the impact of the flow of goods or economics along the Rio Grande."

The economics behind the "twin plant" concept puts manufacturing in Mexico and global distribution in the US. Just as Reynosa is McAllen's twin, Ciudad Juarez is El Paso's; Matamoras teams with Brownsville; and Nuevo Laredo shares trade lanes with Laredo. And the cities, including Santa Teresa, NM, seat at least 141 million sf with more on the way every day. If President George Bush's schedule is held, up to 6,000 National Guardsmen could arrive June 1.

"I don't see any real change with the border patrol or National Guard," says Claude Billings, vice president with Verde Corporate Realty Services in El Paso, which has more than four million sf in hand and a land bank to support another 7.8 million sf of development. "Suppliers are still signing leases. It's the same supply chain activity. If you buy into the premise that if North America is going to have a manufacturing presence, it's going to be along the Mexico border, and I think there will be very little impact on location decisions for suppliers or manufacturers."

In published articles, several officials from border cities fear proposals for a fence will tear into their economic bases. According to the Associated Press, more than 90% of an estimated 11.8 million live in 14 twin cities on the border. One plan calls for 370 miles in three segments in Texas, focusing on the Laredo-Nuevo Laredo region where violence is part of everyday life due to a Mexican drug war.

"American business is not going to be hindered by the guard going down there and stemming the tide of immigration," Newsom insists. "American business continues to go to the border and I don't know that if what's happening there is going to stem that. I know strictly from a real estate perspective, as the largest landowner in McAllen and Sharyland, it seems to be business as usual. We won't be doing anything particularly different."