MCALLEN, RGV – The vacancy rate in the McAllen metro market has shrunk to a record low of 2.8 percent, CBRE reports.

Following a soft previous quarter, CBRE says, “the third quarter of 2018 returned to positive absorption territory and closed with 246,642 sq. ft. of net absorption.”

Carlos Telles, senior associate for CBRE in McAllen.

CBRE issued three bullet points about the report:

  • The market-wide vacancy rate declined to 2.8 percent, a new record low. Class A and B vacancy rates also hit record lows, falling to 2.4 percent and 2.8 percent, respectively.
  • Market-wide average asking rates dipped compared to Q2 2018 as Class C has continued to make up a larger portion of market availability. At the close of Q3 2018, 50 percent of all available space in the market was Class C.
  • The quarter closed with users seeking 1.3 million sq. ft. of space. This is only 546,000 sq. ft. less than total available sq. ft. and almost double the total vacant sq. ft. in the market.

The CBRE report was discussed at a recent McAllen Economic Development Corporation board meeting. 

“A report from CBRE, which monitors the space availability, shows that for the third quarter of 2018 we hit a record low in terms of available space. The Class A and Class B vacancy rate is 2.4 percent, 2.8 percent, respectively,” McAllen EDC President Keith Patridge said.

Keith Patridge, president of McAllen EDC.

“We have a market-wide vacancy rate of 2.8 percent. That is the whole market, not just McAllen. It is the entire metro area,” Patridge explained. “During the same quarter, users were seeking 1.3 million square feet of space. That is almost everything that is available in the area right now.”

Patridge pointed out that McAllen EDC has been urging developers to build more industrial parks for many months.

“We have been talking about this: we need space, we need space. We are working to make sure we have the sites available but we are in need of buildings. Fortunately, we have been able to put the deals together but it is getting harder and harder,” Patridge said.

“It takes ten or 11 months to build a building and so we need to get some buildings under construction. It is not a case of we can send them to other locations because at 2.8 percent (that is not viable). We really need to build some buildings.”

On the positive side, Patridge pointed out that two new major projects have been approved by McAllen City Commission for incentives. These projects will see new industrial space created.

“We are moving forward with the companies. We are putting together projects to start the construction of buildings. Both of these are built to suit,” Patridge said. “Then we have two more that will be going to the commission next week for their consideration of incentives. Those four companies will build 1.88 million square feet of new space.”

Patridge’s optimism about new businesses coming to McAllen was shared by MEDC Vice President Janie Cavazos, who handles business recruitment and retainment on the U.S. side of the Rio Grande. MEDC Vice President Ralph Garcia handles business recruitment and retainment on the Mexican side of the Rio Grande.

In her monthly report, Cavazos pointed to 11 visits by prospective clients over the past month. Many of these are in the cold storage business. If all of these visits turned into actual recruitment it would mean an additional 979,000 square feet of industrial space utilized and an additional 524 jobs.

As for business retention, Cavazos reported on two companies, Denso Ten, which was formerly known as Fujitsu Ten, and Stanley Black & Decker. 

Denso currently has 96 employees in McAllen and is looking at an expansion plan that would see an additional 88 people hired. 

With regard to Stanley Black & Decker, Cavazos thanked businessman Joaquin Spamer for helping with a visit by the company’s corporate VIPs. A private ribbon-cutting ceremony was held at the company’s facility in Mission, with plant manager Mike Amaya giving MEDC staff a tour of the operation. Currently, Stanley Black & Decker has 120 jobs at its Mission plant. By years end, Cavazos said, the company hopes to increase this number to 500.

Editor’s Note: The main image accompanying the above story shows an industrial park in McAllen, Texas. Photo credit: South Texas Commercial Real Estate.