Population growth and industrial activity are exploding along the I-35 corridor in central Texas

Pictured is the Logistics Commerce Center, located at 4923 Corner Parkway in San Antonio. Owned by GID Industrial, the building is part of a 400,400 square foot development that was delivered in 2019 and is now fully leased. As Central Texas’ population is expected to continue its blistering pace of growth in the coming years, developers are scrambling to secure sites for new projects like this.

By Paige Suvalsky, Field Research Manager – Central Texas, CBRE; Rob Burlingame, senior vice president—Central Texas, CBRE; and Miller Hamrick, Texas Industrial and Logistics Research Manager, CBRE

CBRE Research recently featured Austin and San Antonio as an “emerging” industrial market along the Interstate 35 corridor in central Texas. This region makes up much of the western portion of the “Texas Triangle”, a globally mega-region that had an economic output of $1.5 trillion in 2021 and a population of just over 20 millions of inhabitants.

Paige Suvalsky, CBRE

Paige Suvalsky, CBRE

The Texas Triangle represents one of the world’s top 25 economies, just ahead of Spain. The northern apex of the Texas Triangle, Dallas-Fort Worth (DFW), is projected to overtake Chicago by 2034-35 to become the third most populous urban area in the United States with a population of 9.4 million.

This massive boom in population and business is driving the current rush to Central Texas and driving regional and national developers to claim their rights in this growing market. Currently, about 5.5 million people live between the stretch of Texas from Laredo to Georgetown, and the population of this area is expected to increase by 10.8% over the next five years.

According to US Census Bureau data, Hays County was the fastest growing county in the United States between 2010 and 2020, experiencing a 53% increase in population during that time. Comal County ranked second on the list with a 49% increase, followed by Williamson County in fourth place with a 44% increase.

Rob Burlingame, CBRE

Rob Burlingame, CBRE

Overall, six of the 10 fastest growing US counties were in Texas, and three of them were located in the I-35 corridor. To accommodate this growth, over the past five years, industrial developers have increased the volume of space in the corridor by nearly 21.4 million square feet, a 17.7% increase in inventory. total during this five-year period.

The region is home to two major cargo airports: Austin-Bergstrom International Airport, where year-over-year cargo movements grew 12.1% in 2020, and Austin International Airport. San Antonio. In response to Austin’s economic growth, Bergstrom Airport plans to further expand its cargo operations and offer direct flights to major cargo hubs in Europe such as Amsterdam-Schiphol, London-Heathrow and Frankfurt (Germany). San Antonio International Airport has also announced plans to upgrade its airfield, terminals and ground access over the next two decades to support the many routes it currently offers to Mexico.

In addition to I-35, several major highways pass through the region, including Interstates 37 and 10, which provide direct access to the west and east coasts. I-35 also connects the region to Mexico and Canada, making it one of the main beneficiaries of the USMCA trade agreement.

The area is also home to one of the largest railroad terminals in Texas: East Kelly Railport in Port San Antonio. Port San Antonio is a 1,900-acre industrial hub that includes manufacturers, third-party logistics providers and aerospace defense contractors. In addition, Port San Antonio is part of a free zone.

Miller Hamrick, CBRE

Miller Hamrick, CBRE

The past two years have highlighted the fragility of global supply chains, and occupiers have responded by realigning their supply networks, which sometimes means an increased need for warehouse space closer to their customers.

Additionally, as COVID-19 cases continue to grow, China is reinstating containment measures to contain the virus. Closures of factories and ports will undoubtedly have repercussions on global supply networks and the economy as a whole. This in turn will underscore the urgency with which companies will need to assess their supply chains, as backups could reoccur.

In recent times, there have been more and more rumors about “near-shoring”, or the creation of regional value chains that can hedge against geopolitical or epidemiological events in distant regions of the world. Texas, which has already benefited enormously from changes in global supply chains, stands to gain from realigning the global value chain to Mexico. This change will provide a solid labor pool and, above all, proximity to consumers in the United States. Within 250 miles of San Antonio and Austin, occupants can reach a total of 25.4 million consumers.

Although Austin is not traditionally considered a bulk warehouse market, trends that have driven demand in major industrial markets have also resulted in increased demand as companies seek to realign their distribution networks and deepen the coverage of last-mile delivery services. Consumer goods, e-commerce and manufacturing deals related to the planned opening of the Tesla Gigafactory mainly drove industrial demand in the first quarter of 2022.

Austin and San Antonio are both in the Texas-Mexico Automotive Super-Region, an automotive manufacturing mega-region that stretches from Mexico’s Bajio to northern Texas, making them an excellent location for manufacturing suppliers. original equipment (OEM) from top to bottom. major transportation artery. While the Gigafactory is a newer development for Texas, Toyota has been building full-size trucks at its San Antonio plant since 2006.

Just 2.5 hours from the US-Mexico border, San Antonio has strong cultural and commercial ties to Mexico. In fact, Texas companies exported $122.7 billion worth of goods to Mexico in 2021, which accounted for 32.7% of all Texas international exports. Meanwhile, some $108.4 billion in Mexican imports, which drive demand for warehousing space, went to Texas in 2021, representing 34.7% of all international imports into Texas.

Specifically in the automotive industry, imports of vehicles and parts from Mexico totaled $13.8 billion in 2021, and exports of vehicles and parts to Mexico totaled $7.1 billion.

More retailers, wholesalers and third-party logistics providers are expected to target the I-35 corridor in the coming years. The continued development of warehouses and manufacturing along this corridor will eventually merge Austin and San Antonio into one cohesive market. Strong demand will continue to drive down vacancy rates and drive up rents, making the area very attractive to investors for the foreseeable future.

This article originally appeared in the May 2022 issue of Texas real estate business magazine.

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