EL PASO, TX-An examination of the industrial sector in the border towns of El Paso and Cuidad Juarez, just across the border in Mexico, demonstrate an interesting divergence. According to CBRE's Q2 2013 MarketView and its discussion of both cities, Juarez, thanks to its growing maquila employment, is showing the better numbers when it comes to absorption and vacancy rate.
Specifically, Juarez has a total of 60.4 million square feet, a vacancy of 12.1% and net absorption of 1.1 million square feet. El Paso, meanwhile, out of its 54 million square feet of available space, showed a vacancy of 14.2% and net absorption of 1,542 square feet.
According to CBRE's report, El Paso keenly felt the loss of a major tenant when Menlo Logistics vacated 256,000 square feet in the west submarket. That, coupled with only smaller leases being signed, led to the smaller absorption figures.
But Juarez, with its maquilas, has been seeing a great deal of activity, though the CBRE researchers do sound some caveats. First of all, the growth in Juarez industrial is mainly due to demand from the automotive sector, with growth in other sectors limited. Furthermore, landlords in Juarez are aggressively pursuing new tenants, meaning rent rates are lower. As such, the researchers don't believe that current net absorption can be sustained through the remainder of 2013. It's also going to be some time before asking rents increase in any appreciable way.
What's the prediction for El Paso? The CBRE researchers are actually more optimistic here, noting that positive signs are in place for a decent uptick for the second half of the year. One of these is El Paso's economic growth rate. Furthermore, the East and Lower Valley submarkets continue strong. As such combined with demand related to the maquilas, El Paso's industrial statistics should improve for the remainder of the year.
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