Often, the best investment opportunities are ones that few know about.
The Rio Grande Valley is home to such opportunities.
Located in the southernmost tip of South Texas, the Rio Grande Valley is one of the fastest growing areas in the United States.
In fact, according to University of Texas Rio Grande Valley sociology professor Igor Ryabov, “[Rio Grande Valley] grows approximately 20 percent per decade, which is quite impressive for the United States.”
The Valley lies along the northern banks of the Rio Grande, separating the United States from Mexico.
Rich in history, the population of the region has exploded to more than a million individuals encompassing the four counties of Hidalgo, Cameron, Willacy, and Starr.
Hidalgo alone is predicted to top one million residents by 2020.
Why growth matters
At its core, any real estate market depends on the people living and working in that market.
So when we observe fundamental such as the following we know that the market is growing.:
- population increases
- new jobs being created by businesses expanding and/or moving into an area
- new construction of both residential and commercial properties
- public and private infrastructure spending
- affordable cost of living
This, in turn, is a good predictor of more opportunities coming online to profit from the growth.
Business
Businesses will often move to locations where the cost of doing business is low, including everything from regulations and taxes to staffing qualified individuals for their enterprise.
In fact, visionary and billionaire Elon Musk has seen the benefit of doing business in the Rio Grande Valley.
Musk has built the multi-million dollar research and rocket testing facility known as “STARGATE” right outside of Brownsville, at Boca Chica Beach.
This not only brought jobs to the region, but is impacting the area financially by bringing in dozens if not hundreds of full-time, skilled positions to the area.
SpaceX isn’t the only business that sees something in South Texas.
Cascade Engineering was founded in 1973 with just a handful of employees. Now it employs over 1,000 individuals in the making of a diverse range of plastic based products such as:
- Trash containers
- Wind turbines
- Solar panels
- Auto parts
- Furniture parts
- BioSand water filters
In their Brownsville plant, CK Technologies, a branch of Cascade Industries, makes bumpers for large trucks.
The proximity of Brownsville to the port of entry, access to an international railway and to a motivated, skilled workforce were strong motivators for the move.
The company’s move to Brownsville has been beneficial to the residents too, bringing more than 100 direct jobs after the plant was built.
CK Technology’s move was a result of the efforts of the Brownsville Economic Development Council, which has sought to draw businesses in the automotive industry to the region.
“For years we’ve been positioning businesses that have a role in the automotive industry, and that need a strategic location,” said Gilbert Salinas, the council’s vice president.
Other companies new to the Rio Grande Valley include:
- SATA Group – auto parts manufacturer ($114 million in capital investment in the RGV/300+ people employed)
- CARDONE Industries – auto parts supplier ($50 million distribution facility/500 to 750 new jobs)
- Stanley Black & Decker ($25 million for a 300,000 square foot manufacturing plant/up to 450 new jobs)
- Big River Steel ($1.6 billion in investment to the region and a new 800-acre steel mill and distribution plant)
Cost of living
The cost of living in an area is an important consideration when individuals are looking for a place to live. Obviously then, if an area is deemed affordable by the cost of goods and services more people will move into that area.
According to the Brownsville Economic Development Council, the cost of living in Brownsville is ten percent below the U.S. national average.
Perhaps this is why more and more families are choosing to move to the cities of Brownsville, Harlingen, and McAllen in the Rio Grande Valley.
Real estate market
Industrial
Growth in the industrial market of the Rio Grande Valley is due to a combination of factors; an increase in commercial activity along the U.S.-Mexico border along with an increase of political and military interest in the region.
CBRE reports a record low of 3 percent vacancy in the first quarter of 2018, together with positive absorption of tens of thousands of square feet of industrial space.
Average asking rents also rose by 40 cents from the same time in 2017.
Also, both U.S. and foreign manufacturers are growing with brisk international trade playing a key role in the growth of the region.
Retail
Retail sales have grown in the RGV by $4.47 billion from 2002 to 2014, according to NAI Rio Grande Valley and Michael Uhrbrock, senior vice president of research at the University of Texas Rio Grande Valley.
In their study of retail growth across eight cities including McAllen, Brownsville and Harlingen, Uhrbrock and his team anticipate that sales in the valley could grow by $13.68 billion from 2015 to 2030.
The factors that are believed to impact growth in retail sales include the following:
- Increase in residents. Currently, the RGV has nearly 1.5 million residents but is forecast to grow to at least 2.5 million by 2040 (not including residents of Mexico) just across the border.
- When these individuals are added to the mix it’s expected the region will increase bi-nationally to as much as 7 million people by 2040.
- Another driver of growth is education.
- Education opportunities are already growing with the merger of the University of Texas-Pan American campus in Edinburg and the University of Texas at Brownsville into the University of Texas Rio Grande Valley.
- There’s also the establishment of the UTRGV medical school and a Texas A&M University campus in McAllen.
- The growth of both public and private hospitals and medical facilities across the Rio Grande Valley has brought high-income medical professionals into the region.
Multi-family
Secondary and tertiary commercial real estate markets don’t always have the most up to date, comprehensive data to use when forecasting market needs for their products.
Until recently, this was also true for the Rio Grande Valley multi-family market.
The region’s multi-family products were mostly comprised of “clusters” of fourplexes, with different investors owning different units within each of these properties. These complexes didn’t typically have leasing offices or management so the hard data to determine demand was scant.
As a result, developers and brokers in the multi-family market in the Rio Grande Valley believed the common assumption that there wasn’t a huge demand for their Class A properties, so they built few of them.
They were wrong.
Beginning in 2015 multi-family players in the Rio Grande Valley started to notice that not only was there a demand for their product, but there was a big demand for “better” product.
The result was a surge in development, adding 2,500 to 3,000 units over two years, many of which were Class A properties.
While this increase in volume increased the vacancy rate, the units were absorbed back into the market, reaching near equilibrium, with Class A product experiencing solid growth.
Infrastructure
Finally, infrastructure plays a huge role in the growth of a marketplace.
The Rio Grande Valley has 12 international ports of entry which deliver more than $41 billion in cross-border cargo.
Harlingen and Brownsville, both port cities, are investing heavily in infrastructure improvements that will increase the cargo volumes they can accommodate.
This includes deepening and widening shipping channels, expanding railyards and rail access, and rebuilding docks capable of handling liquid bulk product.
These investments will also lead to construction of additional warehouse space that can be leased to materials suppliers, contractors, etc. who need the space for large port products.
Other infrastructure projects include:
- A new rail bridge crossing in the Brownsville-Harlingen MSA
- New cold storage inspection facility at Los Indios bridge
- The proposed development of Interstate 69 which will provide a direct connection between RGV and destination markets across Texas
What investors should know
While all of the growth, planning and changes taking place in Rio Grande Valley is exciting, it’s important to partner with a commercial real estate firm with deep connections in the industry before jumping into the retail or multi-family marketplace.
Why?
Because it will shorten your learning curve about the market and you’ll discover opportunities for investment that aren’t always on the open market.
The team at RubiGroup Capital has a multi-generational network of local land owners, brokers, leaders, and service providers, so we always have our ear to the ground when it comes to projects as well as plans and changes that affect the retail and multi-family development marketplace. If you are considering investing in the Rio Grande Valley and you are an accredited investor, let us know if we can serve you in any way.
Contact us today to find out how you can profit from the explosive growth and investment taking place in the Rio Grande Valley.