MCALLEN, Texas – The scarcity of land and buildings is becoming so acute in McAllen that the city’s economic development team is now moving companies to neighboring cities.
This fact was confirmed by Keith Patridge, president and CEO of McAllen Economic Development Corporation, at the recent 2023 State of Real Estate Forum hosted by Edwards Abstract & Title Co.
The event draw a large crowd of real estate professionals. They could not help but notice a slide shown on two big screens that screamed: We Need Buildings.
“I don’t know how many of you follow it but CBRE produces a McAllen industrial market report. For the last quarter of 2022, McAllen MSA had the second highest net absorption of space on record with 1.1 million square feet of absorption in McAllen,” Patridge said.
“When the report was compiled, we had a vacancy rate of 1.9%. Now, since then, we know for a fact that that number has gone down substantially. So, we now have less than a 1.9% occupancy rate.”
CBRE is a commercial real estate agency in McAllen. MSA stands for metropolitan statistical area.
Patridge had a particular message he wanted to get across to the land developers.
“What’s really important, and this is for all of you that are looking for someplace to invest, demand for industrial space in McAllen, in the McAllen market, also hit a new high of just under three million square feet. And this is two million square feet more than the total vacant space in the market,” Patridge said.
“So we have a deficit right now of two million square feet of space. Just as a sidelight, I will tell you, my team, we are now putting companies in other cities just to keep them in the Valley. And so we need buildings really badly.”
Earlier in his speech, Patridge spoke about why the border region is becoming more attractive to manufacturers. He pointed out that supply chain disruptions in the Far East that started during the pandemic have not been eliminated. And, he said certain provisions in the United States-Mexico-Canada trade agreement are also helping manufacturers decide to move back to North America.
“So now, all of a sudden, the border region is once again becoming an important place for companies to look at,” Patridge said, explaining that under USMCA it can advantageous to build in both the United States and Mexico.
“This makes the border a very attractive place for companies to locate to because now, when you start looking at the operation of running a plant, you have a plant on the U.S. side, you have a plant on the Mexico side, and they’re being managed by one overhead management team. And that reduces the cost for them to operate substantially,” Patridge explained.
“And so, we are now beginning to see companies moving back to the border, simply because of the flexibility of being able to move back and forth and meet the requirements of their company.”
Patridge said that since the pandemic, McAllen EDC has been “consistently working” with between 20 and 30 companies with anywhere from two to five new companies joining their list every month.
“In the February report we gave to our board, we are actively working 26 companies. Eighteen are looking at sites in McAllen, one is looking at a twin plant (Reynosa and McAllen), and seven are looking for sites in Mexico,” Patridge said.
“The companies that are looking for sites on the U.S. would absorb over 2.5 million square feet of space. They would hire in excess of 3,700 employees and have a capital investment over $2.1 billion.”
As for the companies looking at Mexico sites, they would absorb of over 810,000 square feet of space, would employ over 5,400 workers, and make a capital investment of over $70 million,” Patridge added, pointing out that in Mexico most buildings are leased, not purchased.
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