MCALLEN, RGV – Despite the weakness of the Mexican peso against the U.S. dollar, Mexican nationals continue to stream across the border into Texas to shop the growing numbers of American shopping centers being built or expanded to accommodate them, according to the International Council of Shopping Centers.
In an article published in ICSC’s Shopping Centers Today publication, Mexico residents account for about $4.5 billion in annual retail sales in Texas counties along the border. This analysis was conducted by Tom Fullerton, a professor of economics at The University of Texas at El Paso.
“This bounty has motivated a cast of international and local developers to expand their retail presence on the U.S side, particularly in the Rio Grande Valley, which includes the cities of Brownsville, Edinburg, Harlingen, Hidalgo, McAllen, Mission and others,” the article states.
Star billing in the report goes to Simon Properties, a leading global mall developer. Shopping Centers Today points out that Simon is building a 245,000-square-foot addition to its 1.2 million-square-foot La Plaza Mall, in McAllen. “La Plaza, eight miles from the border, is a popular shopping hub for visitors from nearby Reynosa and Saltillo, and also from Monterrey, which is farther away,” the report states, citing mall officials. This new phase, scheduled to open in the fall of 2017, comprises 50 stores, six restaurants and two parking decks.
“Some 40 percent of La Plaza visitors travel from Mexico, says marketing director Isabel Rodriguez. In fact, one-third of McAllen’s overall retail activity is attributable to Mexican nationals, according to Roberto Coronado, senior economist in the El Paso branch of the Federal Reserve Bank of Dallas,” the article states.
“Also coming to McAllen is a grouping of several new or expanding retail, hotel and mixed-use projects, including the Palms Crossing (expanding) and The Shops at 29th (new), both of which near the McAllen Civic Center, which is under construction. (The city is calling the entire project its own West Side Story.) Plans are for some 200,000 square feet of new retail space there over the next few years.”
The Shopping Centers Today article states that Simon’s La Plaza goes to great lengths to cater to Mexican shoppers. It has bilingual guest-services personnel and three tax-back offices (these issue sales-tax refunds to shoppers taking purchases back to Mexico), a currency-exchange business and two banks to assist them, according to McAllen City Manager Roel ‘Roy’ Rodriguez.
In response to the report, the City of McAllen issued a news release. “McAllen is a bi-cultural city; we are an American city that speaks Spanish,” McAllen Mayor Jim Darling said. “Mexican nationals can shop in almost any store and be greeted in Spanish, helping them to feel more welcome as they come seeking products found in America.”
Darling pointed out that the City of McAllen has a strong partnership with Simon. He predicted Simon’s expansion of La Plaza Mall will “further define La Plaza Mall’s status as the ultimate luxury shopping destination in deep South Texas.” The City of McAllen contributed $20 million towards the construction of the two parking decks. City leaders say they made this investment in order to spur the development, arguing that greater retail sales will come more quickly, thus boosting city coffers. Additional sales tax receipts will help pay the debt service for the contribution via a sales tax agreement.
La Plaza Mall, the largest retail shopping center south of San Antonio, generates $400 million in sales per year, according to David Contis, president of Simon’s mall division. “We are part of the economic engine in McAllen and we are proud to be that,” Contis said. A grand opening for the expansion at La Plaza Mall is slated for the fall of 2017.
In the City of McAllen news release, Rebecca M. Olaguibel, retail and business development director for McAllen, says Mexican shoppers contribute billions in annual gross retail sales tax revenue to the McAllen economy.
Referencing the Shopping Centers Today article, Rodriguez, the McAllen city manager, said: “This is an important recognition to receive from an outside organization, reinforcing what we in McAllen have not only been saying, but also, what we have been doing to further develop the retail economy in McAllen.”
The Shopping Centers Today article also references development in the City of Edinburg. There, the article states, locally based Burns Brothers Co. is developing a 500,000-square-foot, mixed-use lifestyle center called Resaca Market. The $250 million, 45-acre project off U.S. Highway 28 is slated to open in 2017 opening. It will encompass some 350,000 square feet of retail, a movie theater, a hotel, a boardwalk and a man-made lake.
“Retail sales continue to be very strong in Rio Grande Valley, which has grown to a population of over 1.3 million,” said Thomas Tyng, a partner at San Antonio–based Reata Real Estate, in the article. “For a long time, the Valley was considered a second-tier market, but large retailers looking at Austin and San Antonio are now looking there at the same time.”
The Outlet Shoppes of Laredo, under construction across the heavily traveled Gateway to the Americas Bridge, is slated for a March 2017 opening, the Shopping Centers Today article states. The 358,000-square-foot first phase, developed jointly by Horizon Group Properties and CBL & Associates, will feature outlet stores for Brooks Brothers, H&M, Michael Kors, The Limited, Under Armour and dozens more. The article says Laredo boasts the nation’s top Walmart by sales per square foot, city the Laredo Development Foundation. Locally based Killam Development is building phase two of its 350,000-square-foot Paseo Casa Blanca center on the east side, anchored by a 50,000-square-foot Conn’s.
The Shopping Centers Today article says Sprouts Farmers Market has opened two stores in El Paso and is now seeking a third there. It cites Bryan Cornelius, a broker and partner at Dallas-based Venture Commercial Real Estate, which represents Sprouts in U.S. border towns. “We have Mexican nationals coming in with coolers and buying all the salmon to take across the border,” Cornelius told the publication. Much cross-border trade is driven by a lack of retail selection on the Mexican side, according to the article. It cites a former Payless Shoe Source real estate executive as saying Payless stores along the border sell 20 percent to 30 percent more than the typical Payless.
The Shopping Centers Today article states:
Like Tyng, Cornelius has seen an uptick in higher-quality concepts on the U.S. side. The 3-year-old Fountains at Farah, in central El Paso, developed by Centergy Retail, of Dallas, has a mid-to-high-end mix that includes Altar’d State, Deutsch & Deutsch, Loft and West Elm, he notes. “The notion that all shoppers from Mexico gravitate only to discounters is a misconception,” said Cornelius. “Many Mexican nationals coming over the border have lots of money, it’s just hard for them to buy what they want at home.” Instead of building in northern Mexico, many retailers find that they can serve those same consumers over on the U.S. side without having to put up with Mexican bureaucracy, he says.
Another new project, the 500,000-square-foot, open-air West Towne Marketplace, is set to open on El Paso’s west side by year-end 2017. This 63-acre retail-entertainment complex on Interstate 10, developed by El Paso–based River Oaks Properties, will have a grocery anchor, big-box sporting-goods and clothing retailers, a movie theater and some upscale restaurants.
Also in West El Paso, work has begun on the mixed-use Montecillo Town Center, just north of Ciudad Juárez. Locally based EPT Land Communities is planning 104,000 square feet of retail, including a grocery and an Alamo Drafthouse cinema, some residences, a hotel and office spaces. This is only the first phase of the 292-acre project, which will eventually comprise 400,000 square feet of retail and 8,000 living units.
Cornelius added that established retailers on the U.S. side, such as Ross Stores, typically have generous loyalty programs aimed at Mexican nationals, plus bilingual signage and employees.
Mexico’s relatively slow adaptation to online retail continues to boost brick-and-mortar sales on the U.S. side, the Shopping Centers Today article states. However, according to an A.T. Kearney report titled 2016: The Tipping Point for E-Commerce in Mexico, a younger, smartphone-toting generation in Mexico is beginning to reverse that.
In the fall of 2013, the article states, Mexican lawmakers increased sales tax in the northern region from 11 percent to 16 percent — about twice what is charged in Texas border cities — which only spurred further cross-border spending. Consumer reaction to the tax has abated and is offset somewhat by the peso’s present weakness relative to the dollar, according to Fullerton, the UTEP professor. “If the peso stabilizes by October or November,” Fullerton said, “it could potentially lead to a bumper holiday season for Texas retailers on the north side.”
Editor’s Note: The main image accompanying the above story shows an artist’s impression of part of the La Plaza Mall redevelopment.