Developing in the Eagle Ford
At Bisnow’s Impact of the Eagle Ford Shale event in San Antonio last week, panelists shared their success and challenge stories about developing in the shale region. Turner Busby Development partner Walt Busby is building retail in McAllen and says trying to develop in these small towns is very difficult. Some aren’t inclined to support outsiders coming in and developing things that change their community, and others aren’t prepared for it even if they accept it. (Walt wanted to build a hotel and multifamily in one city, and officials didn’t know what their electrical and sewage capacity was... the latter is not something you want to find out after you reach it.)
National Property Holdings CEO Michael Plank says 10k to 15k SF metal buildings with outside storage are in high demand, and they don’t require a lot of investment or time to build. That makes them lower risk in case demand dries up in a few years. He says there’s tons of leasing activity among frack sand companies, which often will take five- to 15-year leases. Those need major rail capabilities (most require about 100 connected cars per load). Being dual-served rail is particularly attractive, like the 400-acre Alamo Junction park he opened a few months ago.
Colliers VP Barkley Peschel agrees supply is not meeting the industrial demand. He believes the sweet spot is three to five acres with a 6,000 SF to 10k SF building. Eagle Ford region towns also are starved for retail and hotel development. (They are so desperate that people are seeing mirages of The Gap.) In the 1604 corridor, that’s starting to transition to single-family and multifamily construction. Our panelists agree that employment is the area’s biggest challenge—Barkley says it’s difficult to convince retailers to go into the Eagle Ford because they might not be able to staff their stores.
REOC SVP/partner John Turcotte (here between SandCan’s John Sheesley and Reynolds & Lapp’s Mikel Reynolds) sold a hotel in Cotulla last year where rooms averaged $242/night. There are very few barriers to entry or controls in place in some of these towns, which is how five hotels popped up in Cotulla practically overnight. (It's the new dehydrated hotel construction method... just add water.) He says the Eagle Ford is driving San Antonio’s industrial market to new records, like our 95% warehouse occupancy and 8% rent jumps last year alone.
Kemosabe Development principal Robert Anthony (who says his hair rubbed off after 13 years in a football helmet and a handful in a military pilot’s helmet) is building all property types in the region. He’s preparing to develop mixed-use on I-35 in Cotulla. The property will include multifamily, retail, and 40 acres of industrial. He’s looking at two to three times typical industrial rent because users just don’t have anywhere else to go. (In the next 30 days, water and sewage will be in place and he can start building.)
