Developers Find Creative Ways to Meet Demand In Thriving El Paso Retail Market

April 27, 2022

Historically, the El Paso market is often overlooked, primarily due to its distance from other major Texas markets. However, that sentiment is shifting rapidly due to strong economic and population growth. While an accurate figure is difficult to pin down, the number of new entries to the market and expanding franchises has exploded in recent years. “As recently as 2015, national and regional operators were only beginning to recognize the sales potential of the El Paso market and just how underserved the growing population had become. Competition was limited which led to advantages for existing operators. The landscape shifted dramatically due to the pandemic – since Q2 2020, new categories of operators have become active and marketing quality sites generally leads to multiple offers from competing operators including car washes, lube shops, coffee shops and other QSR’s. We love to see this variety move into our market and drive competition for their next great location,” states Scott Walker, President of MIMCO.

Market competition is advantageous and a key driver of innovation. Retailers use competition to discover and adopt the most efficient processes that will allow them to deliver new and improved products to the consumer. This newfound competition in El Paso is forcing retailers to step up their offerings in order to capture market share in this consumer driven economy.

MIMCO, like most landlords and developers in Texas, has seen an enormous jump in demand for sites that offer drive-thru and pick-up windows. The lack of existing supply, coupled with increased demand has turned average pad sites into highly sought-after options in the market. Traditionally, MIMCO would acquire land sites and market the least desirable portion of the site to traditional retailers. Now, in the current climate, the demand for pad sites from new entries to El Paso is what drives the marketing. An added benefit is that these pad users drive so much traffic that it’s now easier to solve for the less desirable or rear portions of sites. With this new demand, El Paso landlords have an exciting opportunity to reimagine their existing portfolios and consider new functionalities of sites they own. With national tenants hunting for property free and clear of buildings, trees and other impediments, there is little hesitation to invest dollars toward repurposing sites. MIMCO has recently had success repurposing former small-format gas stations, well-positioned office buildings on major arterials, and even tennis courts, into a new class of retail loaded with quality tenants.

As one of largest owners and developers of retail commercial real estate in the Southwest, the team at MIMCO has worked hard to navigate the challenges of the past two years. During this time, the primary focus was to assist the company’s existing tenants, although many challenges these businesses faced were outside of MIMCO’s control. Fortunately, the economy swiftly saw a return to pre-pandemic occupancy levels, even as consumer patterns were changing. While MIMCO is pleased to see new growth in its own centers, the team is excited to see continued growth in the community through new developments. Local and national developers are moving dirt, signing new leases, and redeveloping underutilized sites in El Paso’s neighborhoods. This range of new developments spans from the enormous Amazon fulfillment center going live in El Paso’s far Eastside, to a local developer putting forth one of El Paso’s first village-style retail projects in far Northwest. In addition, new retailers continue entering El Paso and joining these new developments, leading to compounding growth for El Paso as these new entries look for multiple locations. Although activity is up and deals are closing, it is important to consider the massive increases in construction costs, material costs and labor costs. Shipping logistics have been thrown off and increasingly long delays are common. Planning and budgeting of new projects is never an exact science, but with these uncertainties, it’s created a strange climate of unknowns. Inflation is consistently top of mind, forcing landlords to push rents across their portfolios to keep up with the market.

Two corridors that typically stand out to new entries in the market are Artcraft/Paseo Del Norte in the Northwest submarket and Eastlake Blvd/I-10 in the Southeast submarket. While activity in those submarkets is incredible and usually a top choice for a first or second location, more operators are pivoting to find infill sites for subsequent locations. One prime example of these infill sites is seen as you drive by the site formerly known as the El Paso Independent School District Tennis and Training Center. When MIMCO won the bid for the 10-acre site covered with 20 plus tennis courts and a clubhouse, many thought it was an odd play to take on a large and speculative project in the Northeast submarket. When marketing of the redevelopment kicked off, activity was strong. It quickly became clear there was plenty of interest from national and regional operators to fill a void in an underserved market. At the height of marketing this project, the pandemic hit, leading to uncertainty and some delays. However, as time passed, it became clear that business would return, operators still needed to grow and the fundamentals that proved up the site in the beginning remained the same. Olive Garden had been looking to fill a hole in this submarket for years in order to capture the surrounding rooftops. Tommy’s Express Carwash recognized the lengthy wait times at the limited number of car washes in the area. Other uses - ranging from traditional retail/service providers, medical, restaurant and a hotel - landed sites to round out the development in a combination of free standing and multi-tenant buildings. More recently, MIMCO signed its first deal with Dutch Bros, an exciting drive-through focused coffee chain that is relatively new to El Paso. As of today, this development has two pad sites remaining which offer an opportunity to join an established and well-rounded tenant mix. MIMCO thrives on developing these relationships and is constantly searching for A+ sites to put in front of businesses that provide new experiences for the people of El Paso.

Now in the second quarter of 2022, MIMCO is deeply aware of the headwinds affecting the industry and the nationwide economy. Rising inflation, rising interest rates and geopolitical unknowns will undoubtedly affect the community’s daily lives and wallets. That said, if the company’s rebound from the great recession and global pandemic are any indication, it is MIMCO’s belief that things will continue to look up for El Paso and the State of Texas for the foreseeable future. El Pasoans are widely known for their warm and welcoming personalities. Its property owners, developers and real estate professionals are no different. Together, we look forward to increased and continued attention from retailers, service providers and restaurants looking to plant their flag in this thriving Texas city.

• Andy Moreno has been with MIMCO 14 years working operations, acquisitions, and business development with tenants. Andy can be reached at amoreno@mimcoproperties.com.

• McGee Sauls has been in the Commercial Real Estate industry for 12 years and with MIMCO for over 5 years, working primarily in a leasing role across the portfolio in addition to business development. McGee can be reached at msauls@mimcoproperties.com.

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