The Understated Impact of Cross-Border Investment on the Rio Grande Valley
Texas leads the nation in exports, and the U.S.-Mexico border is an enormous part of that. Since the passing of the North American Free Trade Agreement, or NAFTA, in 1994, trade between the United States and Mexico exploded.
So what does this mean for the Rio Grande Valley economy? This means that south Texas is the “front door” to the benefits of cross-border trade. Trade between Mexico and the United States has made the Valley thrive in the last two decades, bringing many jobs into the region.
This growth has only continued in the last 25 years. Money is pouring into every sector, from medicine to retail. With a growing population, demand for commercial real estate space is increasing.
How Much Trade Happens on the Texas Border?
The volume of trade between Texas and Mexico is astounding. About 75 percent of land trade between the United States and Mexico passes through Texas. Since NAFTA was instituted, exports from Texas have risen 13 percent annually. In 2015, exports of manufactured goods were the source of 999,000 jobs in Texas. This accounted for 8.2 percent of the entire Texas job market.
What is more, the border region is home to a unique set-up in international trade. It is called production sharing. Essentially, U.S. companies place some of their work facilities in Mexico, resulting in lower overall costs.
With production and operation costs tapered, exports happen much more easily. Finding ways to get things done cheaper means there is more money for everyone at the end of the day.
But that is not all. Since the institution of NAFTA, the international market has become more diverse. It was once largely focused on markets like apparel, but now it has branched into other sectors like technology. This means more jobs and investment money flowing into the Valley.
What Are the Effects on the Rio Grande Valley?
The job growth is being seen across sectors, from medicine and education to retail, and is expected to continue.
As trade between the U.S. and Mexico expands, the unemployment rate in the Valley is dropping. Before the trade agreement, some towns in the Valley had a much higher rate of joblessness. In McAllen, for example, unemployment was at 18 percent. In Brownsville, it was around 13 percent. Across all Hidalgo County, it ranged between 20 percent and 25 percent. Now, unemployment at both towns stands at around 6 percent, and Hidalgo County has a low rate of 4 percent.
About 25 percent of the economic boom between 1994 and 2018 in Texas can be linked to border trade.
Between 1994 and 2004, the Rio Grande Valley underwent a drastic change. It had once been an agricultural region with high poverty rates. Increased border trade has transformed it into one of the fastest-expanding areas in the U.S.
Commercial, retail, and residential development flourished. International bridges were built to connect towns across the border. More traffic coming through meant more construction, more jobs, and new markets.
The biggest part of the development is the expanding economy. No longer is the Rio Grande Valley reliant on a few markets like retail. Now, everything, from tech to petroleum to transport, is pouring money into the region.
New companies set up facilities in the Valley, bringing more job opportunities. Retail and residential opportunities have also exploded. Some experts said there wasn’t a sector that was untouched by the Texas-Mexico trade. Restaurants, services, and other industries all reflected that.
With the economic expansion, companies are considering to move to the Rio Grande Valley, as well as, individuals looking for investment opportunities.
What Does This Mean for Commercial Real Estate in the Rio Grande Valley?
As the economy grows, so does the demand for real estate. Companies locate in the region, and people move with them. This increases the need for commercial real estate, including the demand for office spaces, medical facilities, multifamily housing, retail buildings, and more.
The demand for commercial real estate in the Valley has climbed steadily in recent years. All kinds of retailers, from small local names to internationally beloved chains, are choosing to create a presence in the area.
One major reason for the expansion in commercial real estate was the establishment of the University of Texas Rio Grande Valley. The university has bolstered the need for everything, from student housing to medical facilities.
In fact, one goal of the university is to bring more people into the Rio Grande Valley. UTRGV’s School of Medicine offers incentives for students to settle in the region. Meanwhile, it is also continuing to expand its campus with new facilities. One example is the new nursing facility, which has 120 beds.
Conclusion
With the Valley’s continued growth, it is a unique time for the commercial real estate sector. With a large and diversified economy, the population of South Texas continues to rise rapidly. And that growth doesn’t show any signs of stopping soon.