Future Cities
Emerging Industrial Markets: Laredo, Texas
February 17, 2023
Laredo is home to one of the busiest U.S./Mexico land ports, facilitating $25 billion in trade per month or nearly 60% of all annual trade between the two countries. The region’s burgeoning industrial market benefits from near-shored manufacturing operations in Monterrey and other major Mexican markets within a two-hour drive. Laredo continues to see record demand and low vacancy rates for industrial space. Many developers are completing speculative bulk warehouse and distribution projects to support growing demand across the region.
Demographics
Laredo’s industrial market straddles the U.S. border with Mexico and reaches more than 8 million people within a 250-mile radius. More than 285,000 people live within 50 miles, 25% of them in the important 18-to-34 age group.Figure 1: Laredo, TX Population Analysis
Source: CBRE Location Intelligence.
Figure 2: Laredo, TX Warehouse & Storage Labor Fundamentals
Source: CBRE Labor Analytics.
Location Incentives
According to CBRE’s Location Incentives Group, the Texas Enterprise Fund (TEF) offers one of the top economic incentive programs available to companies that locate in Laredo. TEF awards discretionary cash grants to companies considering a new project for which a Texas site is competing against other out-of-state locations. Grant amounts are determined based on the average wage of new employees, the hiring timeline and a company’s total capital investment.
The Skills Development Fund also provides job training grants to Texas community and technical colleges for customized training programs to upgrade the skill levels of new or existing employees, as well as increase wages of the Texas workforce.
Figure 3: Top Incentive Programs
Source: CBRE Location Incentives Group.
Note: The extent of state and local incentive offerings depends on location and scope of the operation.
Logistics Drivers
Laredo’s convenient access to Mexico, growing industrial market and abundant labor force make it particularly attractive to companies seeking supply chain efficiencies. Located along the Rio Grande, Laredo is one of the South Texas region’s many important industrial markets, including in Mexico. The city is within 160 miles of San Antonio, Corpus Christi and McAllen, Texas, as well as the major automobile manufacturing hub of Monterrey, Mexico. Two of Laredo’s four international bridges with Mexico—World Trade Bridge and Columbia Bridge—can accommodate commercial cargo vehicles. The Port of Laredo is Texas’s busiest commercial land port on the U.S.-Mexico border and the third largest in the nation by total annual trade value. It handled more than $268 billion in trade with Mexico in 2022, up by more than 20% from 2021.
By road, Interstate 35 connects Laredo with a 1,500-mile swath of the U.S. through six Midwest states to Duluth, Minnesota. By air, the region is served by Laredo International Airport, which handled nearly 638 million pounds of cargo in 2021—a 57% increase from 2020, according to the Federal Aviation Administration (FAA). In 2022, Laredo’s air cargo volume totaled 712 million pounds through November (latest data available). By rail, the market is served by the Class I Union Pacific and Kansas City Southern lines, which also provide access to Mexico.
Supply & Demand
Laredo’s industrial real estate supply (buildings of 20,000 sq. ft. or more) has grown by 10% over the past five years to 36 million sq. ft., with a vacancy rate of just 1.5%. More than a third of its total industrial inventory is made up of facilities in the 100,000-to-250,000-sq.-ft. size range. It has only one building of 500,000 sq. ft. or more. Due to low availability and a lack of substantially sized spaces, eight new facilities of 200,000 sq. ft. or more are currently under construction for a total of 2.6 million sq. ft.
Average industrial asking rent increased by 6.1% year-over-year in 2022 to $9.53 NNN per sq. ft. and is forecast to rise by another 10% in 2023. As more manufacturing operations are nearshored, trade with Mexico is expected to increase and make Laredo even more attractive to industrial investors and occupiers.
Figure 4: Laredo, TX, Historical Data
Source: CBRE Research, Q4 2022.
Figure 5: Laredo, TX, Size Range Comparison
Source: CBRE Research, Q4 2022.
Emerging Industrial Markets
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