Q3 El Paso Industrial: Scarce Product, Lower Vacancies, Higher Rents

In reporting on El Paso’s industrial sector for Q3 2019, CBRE pointed to a decline in net absorption, even as the metric remained above the 50-quarter trailing average and historical third-quarter average. Meanwhile, the market-wide vacancy rate fell 30 basis points from the record low set in Q2 2019, and by 240 bps compared to the Q3 2018 rate of 6.8%. “The market has seen five and a half years of almost uninterrupted positive net absorption and strong demand for space,” CBRE analysts noted, adding that the result has been a scarcity of space, reflected in the current higher asking rents.

While the Cushman & Wakefield figures differed on the net absorption front, analysts did agree with CBRE’s mention of a fall in vacancy and increase in asking rents, “largely due to market demand and lack of supply,” the Cushman & Wakefield analysts said.

In terms of outlook, Cushman & Wakefield analysts said that, given that Mexican-based manufacturing continues to rise across the Rio Grande River in Ciudad Juarez, while the El Paso market continues to see increased demand for warehouse and distribution space (space that continues to be in limited supply), the market will continue favoring landlords. “The dearth of new construction and unfulfilled demand will continue to increase lease rates until new supply arrives,” the analysts added.