Economy or Supply
El Paso’s regional economy is highly dependent on international trade with Mexico. Growth remained moderate through the third quarter. Contributors included encouraging job creation, strong cross-border trade activity in the range of $140 billion dollars per month, and robust demand for industrial products. Ancillary contributors were credited to continuing expansion of professional and business services, and active mining and construction employment increases.
El Paso’s unemployment rate increased, but no single contributing factor was identified. As referenced in the past with the Dallas Federal Reserve, trade volumes through the El Paso district increased by about 3% each month or close to 25% above 2025.
Supply or Demand
The third quarter delivered four speculative buildings and two build-to-suits totaling 1.9± million square feet (msf) of new product. At the close of the quarter, 2.5± msf is reported to be in the pipeline for delivery in 2027. New leasing activity amounted to 1.1± msf across 30 buildings. The overall market vacancy rate rose by 60 basis points, from 10.4% to 11% with quarterly net absorption at 397,460 square feet (sf) and 2.8± msf year-to date.
Previously reported, new buildings are leasing at approximately $9.50/sf/yr. It appears a floor has been reached, transactions have happened at or just below $9.00/sf/yr. With the U.S. midterm elections weeks away, the uncertainty with the economy has impacted long term decision making for the near term. The pipeline for leasing activity in Mexico remains relatively static, inquiries have continued. This points to an optimistic outlook for 2027 for new customers to locate in Chihuahua and Juarez, Mexico, directly impacting leasing prospects in our region.
It is worth repeating that the local economy requires clear trade policies and the updated USMCA trade agreement is a critical component to our success. Cushman and Wakefield | PIRES will track the events that impact those items and will report back regularly.
Pricing
As indicated above, industrial lease rates remain competitive but are trading in a band that is not expected to change much throughout the remainder of 2026.
