Dive Brief:
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Labor disputes on the West Coast and growing cost of goods imported to the U.S. from China have pumped up demand among manufacturers for property along both sides of the U.S.-Mexico border.
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A report from real estate information company CoStar pointed to several transactions, including the $8.1 billion purchase by IndCor Properties of 18 buildings with a combined 2.13 million square feet in El Paso, TX, as evidence that the Texas border cities — traditionally filled with warehouses — are morphing into a home for manufacturing as U.S. companies “reshore” their production from China back to North America.
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A flurry of transactions along the border has increased rents in the area. CoStar reported that little construction had occurred in those markets since 2008. But between 2013 and 2015, rents have increased from a cyclical low of $3.65 per square foot to almost $4 per square foot.
Dive Insight:
NAFTA rules allow manufacturers to use low-cost Mexican labor to assemble goods south of the U.S. border and then move them into the U.S. for finishing so they may claim the products were made in America, according to CoStar.
Goods shipped to West Coast ports have declined by 30% because of ongoing labor disputes there. "Things move fast in today's market, and if you can’t get goods to your client, you're in trouble," Sean Dalfen, president of private equity firm Dalfen America Corp., told CoStar.
