South Texas Sees Largest Industrial Lease in Two Decades

The industrial market in South Texas is breaking records. In a milestone transaction, international trade and logistics services company The JAMCO Group has signed a 500,000-square-foot, long-term lease to occupy a former Mattel facility in Laredo, Texas, owned by industrial power player Majestic Realty Co. The deal is the largest lease transaction in the market in two decades, since 1999.

The new lease transaction triples JAMCO’s current footprint. The firm views Laredo as a key logistics market in the US, and they aren’t alone. Laredo is severely supply constrained with limited options for quality space in any size range. As a result, there was strong completion for this property from users across the country. “There is a complete supply constrain for any new, modern bulk space. Anything that does come online usually gets gobbled up pretty quickly,” Kyle Valley, SVP at Majestic Realty, tells GlobeSt.com. “We had Fortune 500 companies looking at the space, but this group came through with a great plan.”

Laredo is an interesting logistics market. It rarely receives significant attention among investors or developers; however, the city is home to the nation’s largest inland port. “Most people across the country don’t understand the logistical importance of Laredo to the global logistics community and especially to North American trade,” says Valley. “It is the largest inland port in the country, and it is the first customs district port in the country. Laredo gets lost in the shuffle because people don’t realize how much trade actually goes through here.”

As a result, the market suffers from an unhealthy supply-demand imbalance with a low vacancy rate and limited large-box or quality product. The JAMCO facility is the largest building in the market currently. “The market competes with the likes of Southern California, Chicago, Houston and New York/New Jersey on trade, but in terms of supply, it pales in comparison,” says Valley. “It operates more like a small tertiary market. It is tough when you look at the importance of the market to the logistics community and you compare it to the practical nature of the product that is available. There is a complete disconnect in the market.”

With so much demand for quality space, Majestic has taken a bullish position on the Laredo. “We are really the only institutional owner of industrial product in Laredo, and we are the largest industrial owner of product in Laredo,” says Valley, adding that the he firm is doing its part to create more supply. It acquired the 2,000-acre former Mercedes-Benz test site and development of Port Grande in 2015 and is developing five of the largest properties in the market. “We took a 2,000-acre position in Laredo about two years ago, and that is our single largest land position in the country,” adds Valley. “We have developed 1 million square feet of product, and we are ready to roll out the next phase of development, which will be another 2 million square feet of product, into a market that has positive absorption beyond what it can handle.”