SPECIAL REPORT: Santa Teresa growing pains as space dwindles
The area around the Santa Teresa airport has seen a major boom in recent years. The expanding port of entry, airport and railroad facilities have turned it into a hotspot for warehouses and industrial use. But now there’s a problem: It’s almost out of warehouses ready for new businesses.
The ribbon cutting of a new business coming to the logistics park at Santa Teresa has been a common sight over the last few years. But the grand opening of ERO Intermodal Services in January might have been the last one for some time.
That’s because after years of booming demand, Santa Teresa is running out of space.
“It’s been an incredible run in the last 5 to 7 years,” said Jerry Pacheco with the Border Industrial Association. “We’ve gone from 800,000 square foot of empty space out here, in a 3.3 million square foot industrial base, to our last 8,000 square feet available.”
There’s still plenty of land available out at Santa Teresa. The problem is, no investors want to build empty warehouse space on the thought that someone might move in. That’s due in no small part to the conditions in the industrial market back in El Paso.
Warehouse and industrial properties in El Paso and Santa Teresa compete for many of the same tenants. A number of large vacancies in El Paso are holding the Santa Teresa market back.
Case in point: The former Hoover warehouse and manufacturing plant holds nearly 500,000 square feet of rent-depressing available space.
“I think the major growth we saw in the last few years will slow down because there’s not the availability of space for new tenants,” said Christian Perez Giese, senior vice president at CBRE Brokerage.
The hundreds of thousands of vacant square feet in the Hoover plant and others like it in El Paso means it’s just too risky for developers to build in Santa Teresa right now. The region as a whole has a vacancy of top tier warehouse space at 12.5 percent, while Santa Teresa is sitting at 99.8 percent full.
That’s also keeping rents down at about $4.50 per square foot a year for the region, while modern construction costs and rate of returns require rent closer to $5.50 per square foot
Something’s got to give, and industry analysts say demand always wins out in the end.
“We don’t have any expectation that the demand out there decreases” Giese said. “I think there’s a really long term story, a really positive long term story, with the growth of the intermodal business”
“Well, we’re not done,” Pacheco said. “We have so much land. We’re still doing build-to-suits. We’re still selling properties for companies that are going to build their own building.”
With the border crossing, railroad and expanded runways on the horizon for the airport, Santa Teresa is still looking like a logistics mecca for our region despite the warehouse holdup.
Pacheco also said that there will be a groundbreaking for another company relocating to Santa Teresa in the first quarter of 2015.
