Bond Passage Timely for CRE Issues, Developments
EL PASO, TX—The three so-called “quality of
life” propositions that passed Nov. 6 will do
a number of things to help the city, ranging
from downtown revitalization to development of a triple-A baseball park. As such,
experts note that the bonds, which total in
excess of half a billion dollars, are the next
step in bringing El Paso to
another level, to better compete
with other Texas metropolitan
centers to the east.
“What these propositions will
do is help make us more competitive with other Texas cities,”
comments William Blaziek, general manager with the El Paso
Convention and Visitors Bureau.
“Much of our history isn’t so much what we
haven’t done, but what those other cities
have done. We’d fallen behind.” Giancarlo
Da Prato, with local commercial and resi-
dential real estate company GDP Realty,
puts it another way. “The basic question
comes down to, what is there to do on the
weekends?” he notes. “What is the culture,
the restaurants, and where to shop. It
sounds crazy, but those are the basic funda-
mentals that had been preventing employ-
ers from coming to El Paso.”
The voter support of Propositions 1, 2
and 3 are geared to help those fundamen-
tals. Furthermore, the passage of the three
propositions is “the first time there was pub-
lic comment and approval of specific issues
mercial attractions, such as amusement
parks and water parks.
The bonds, which total over a half-
billion dollars, are the next step in
bringing El Paso to another level,
to better compete with other Texas
metropolitan centers to the east.
and development that will take place over
the next 10 years,” says Christian Perez
Giese, senior vice president and director of
CBRE’s El Paso/Juarez office.
Quality of life is fine, but what effect does
this have on commercial real estate? Blaziek
said he hopes to see developers building
quality hotels in Downtown El Paso in proximity to the city’s 225,000-square-foot convention center. He also wants to see com-
Net Lease Looking Good as the Year Closes Out
Overall net lease activity in the Southwest (Arizona, Texas,
Oklahoma, New Mexico, Arkansas, Louisiana, Mississippi and
Alabama) is projected to close out 2012 at or close to the peak
levels seen in 2007.
The national single-tenant, net lease market
is projected to end 2012 at $36.6 billion in sales
volume, or 94% of its peak in 2007 and 326%
over 2009. Meanwhile, total sales volume in the
Southwest markets was
$3.89 billion in 2007 and
is projected to end 2012
at approximately $3.75 billion, or 96% of its
2007 peak and 357% over its 2009 volume.
The increased activity is located primarily
in Texas, which leads the country in job growth and lower unemployment rates. Logically, the hottest net lease markets in the
Southwest include major metropolitan cities such Houston,
Dallas, Austin, San Antonio and Phoenix. Also, an increase in the
single-tenant, net lease industrial activity in the “shale play”
regions, such as Midland/Odessa and south of San Antonio, is
expected to stay strong as major oil and energy companies have
immediate needs for manufacturing facilities to keep up with
Cap rate trends in the Southwest are compressing, which mirrors the national market, and while they have not reached 2007
By Jim Gibson
levels yet, they are around 70 basis points more aggressive than
they were in 2009. The lower cap rates are even more dramatic
on properties secured by investment-grade tenants such as
Walgreens, CVS, and Chase on the retail side and FedEx,
Schlumberger and GE on the industrial side. The increased activity and increased values are due in part to the low interest rate
environment, supply and demand imbalance and growing investor confidence in the net lease space.
While institutions, REITs and pension funds make up the lion’s
share of the buyer pool, the Southwest has seen a significant
increase in the individual investor pool as well. Although cap rates
have compressed in all of the Southwestern markets, we are finding
single-tenant, net lease assets in the region that can typically be
purchased at a slightly higher cap rates than comparable properties in California.
The fact that Texas has no state income tax is attractive to individual investors. That, coupled with slightly better pricing, has
assisted in increased sales volume.
In sum, 2012 was a fantastic year in the Southwest net lease market. Should financial markets remain relatively stable, 2013 looks to
be more of the same.
Jim Gibson is Houston-based senior director, investment sales, with Stan
Johnson Co. He may be contacted at firstname.lastname@example.org. The
views expressed here are the author’s own.
Vital Signs...Houston’s industrial sector boasts close to 4 MSF of positive net absorption year-to-date for 2012.—Colliers International