{"id":10323,"date":"2025-05-05T19:02:37","date_gmt":"2025-05-05T19:02:37","guid":{"rendered":"https:\/\/www.lee-associates.com\/houston\/?p=10323"},"modified":"2026-02-12T14:46:53","modified_gmt":"2026-02-12T14:46:53","slug":"border-boom-could-bust-how-tariffs-risk-damaging-a-real-good-thing","status":"publish","type":"post","link":"https:\/\/www.lee-associates.com\/houston\/2025\/05\/05\/border-boom-could-bust-how-tariffs-risk-damaging-a-real-good-thing\/","title":{"rendered":"Border Boom Could Bust: How Tariffs Risk &#8216;Damaging A Real Good Thing&#8217;"},"content":{"rendered":"<p>&nbsp;<\/p>\n<h3>April 13, 2025 | HOUSTON, TEXAS | Maddy McCarty and Billy Wadsack<\/h3>\n<p>&nbsp;<\/p>\n<p dir=\"ltr\">Lee &amp; Associates\u2019\u00a0<a class=\"tag tag-178061\" href=\"https:\/\/www.bisnow.com\/national\/news\/industrial\/theres-no-space-left-in-cities-like-laredo-as-industry-breaks-for-the-border-113824\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"178061\">Enrique Volkmer<\/a>\u00a0calls himself \u201cthe happiest guy in town\u201d after returning to his hometown of Laredo in 2016 to broker real estate deals for third-party logistics companies and other industrial tenants.<\/p>\n<p dir=\"ltr\">In just the first two months of this year, Volkmer racked up 11 new lease signings.<\/p>\n<p dir=\"ltr\">Those deals have become exponentially bigger and more plentiful since the United States-Mexico-Canada Agreement went into effect in 2020, helping propel a fast and furious mission to shift\u00a0<a class=\"tag tag-6777\" href=\"https:\/\/www.bisnow.com\/tags\/manufacturing\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"6777\">manufacturing<\/a>\u00a0away from China to Mexico. The industrial associate who once sought greater opportunity in metros like San Antonio believes the best is yet to come.<\/p>\n<p dir=\"ltr\">\u201cIt&#8217;s anywhere between 20M and 25M SF of industrial manufacturing that&#8217;s being built today between Monterey and Saltillo and Ramos,\u201d Volkmer said of ongoing activity set to come through the nation\u2019s\u00a0<a href=\"https:\/\/www.bts.gov\/content\/top-us-foreign-trade-freight-gateways-value-shipments-current-billions\" target=\"_blank\" rel=\"noopener\">busiest trade hub across land, air and sea<\/a>. \u201cThat is a lot, and all of it is going to come to Laredo.\u201d<\/p>\n<p dir=\"ltr\">Laredo has evolved into an industrial real estate powerhouse over the past half-decade, the crown jewel on the necklace of bustling Texas\u00a0<a class=\"tag tag-178058\" href=\"https:\/\/www.bisnow.com\/tags\/border-towns\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"178058\">border towns<\/a>\u00a0turbocharged by a wave of\u00a0<a class=\"tag tag-181779\" href=\"https:\/\/www.bisnow.com\/tags\/nearshoring\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"181779\">nearshoring<\/a>\u00a0that sent manufacturers and logistics operators swarming to both sides of the Texas-U.S. territorial line.<\/p>\n<p dir=\"ltr\">But that growth is threatening to halt amid a\u00a0change in the U.S. approach to\u00a0<a class=\"tag tag-129944\" href=\"https:\/\/www.bisnow.com\/tags\/tariffs\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"129944\">tariffs<\/a>, including a 25% tariff on steel and aluminum as well as goods not compliant with the United States-Mexico-Canada Agreement, a 10% baseline tariff levied on more than 90 nations, and\u00a0<a class=\"tag tag-133285\" href=\"https:\/\/www.bisnow.com\/tags\/president-donald-trump\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"133285\">President Donald Trump<\/a>\u2019s most recent imposition of 145% tariffs on most Chinese goods.<\/p>\n<div id=\"attachment_10383\" style=\"width: 522px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-10383\" class=\"size-medium wp-image-10383\" src=\"https:\/\/www.lee-associates.com\/houston\/wp-content\/uploads\/sites\/80\/2025\/05\/World-Trade-Bridge-Google-Maps-512x350.png\" alt=\"World Trade Bridge near Laredo, Texas\" width=\"512\" height=\"350\" srcset=\"https:\/\/www.lee-associates.com\/houston\/wp-content\/uploads\/sites\/80\/2025\/05\/World-Trade-Bridge-Google-Maps-512x350.png 512w, https:\/\/www.lee-associates.com\/houston\/wp-content\/uploads\/sites\/80\/2025\/05\/World-Trade-Bridge-Google-Maps-1280x874.png 1280w, https:\/\/www.lee-associates.com\/houston\/wp-content\/uploads\/sites\/80\/2025\/05\/World-Trade-Bridge-Google-Maps-768x524.png 768w, https:\/\/www.lee-associates.com\/houston\/wp-content\/uploads\/sites\/80\/2025\/05\/World-Trade-Bridge-Google-Maps-1536x1049.png 1536w, https:\/\/www.lee-associates.com\/houston\/wp-content\/uploads\/sites\/80\/2025\/05\/World-Trade-Bridge-Google-Maps.png 1920w\" sizes=\"auto, (max-width: 512px) 100vw, 512px\" \/><p id=\"caption-attachment-10383\" class=\"wp-caption-text\">Photo: Google Maps<br \/>World Trade Bridge near Laredo, Texas<\/p><\/div>\n<section class=\"specialReportTemplate__image-section\">\n<div class=\"specialReportTemplate__image-wrapper\">\n<p dir=\"ltr\">\u201cIt\u2019s a very fluid situation right now,\u201d said Cliffe Killam, president and CEO of Killam Development, one of Laredo\u2019s largest industrial employers and landowners.<\/p>\n<p dir=\"ltr\">While under-construction projects are still moving full-steam ahead, Killam said tenants are hitting the brakes on leases as border markets brace for the impact of shifting-sand trade policy.\u00a0<a class=\"tag tag-39751\" href=\"https:\/\/www.bisnow.com\/tags\/savills\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"39751\">Savills<\/a>\u00a0warned\u00a0<a href=\"https:\/\/pdf.euro.savills.co.uk\/usa\/in-depth-reports\/texas-border-vf.pdf\" target=\"_blank\" rel=\"noopener\">in a new report<\/a>\u00a0that the region is at an \u201cinflection point\u201d that could disrupt trade flows, burden manufacturers with higher input costs and put real estate decisions on ice.<\/p>\n<p dir=\"ltr\">Those invested in the border are shaking it off, arguing the two countries have become too economically entangled to easily unwind relationships.<\/p>\n<p dir=\"ltr\">Yet other sources told\u00a0<em>Bisnow<\/em>\u00a0that in addition to stalling previously fast-paced leasing, fear is mounting that a new era of trade that disadvantages the border could reshape\u00a0<a class=\"tag tag-145192\" href=\"https:\/\/www.bisnow.com\/tags\/supply-chains\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"145192\">supply chains<\/a>\u00a0again, shifting site selection decisions\u00a0<a href=\"https:\/\/www.areadevelopment.com\/BusinessGlobalization\/q1-2025\/a-tale-of-two-industrial-winds.shtml\" target=\"_blank\" rel=\"noopener\">to manufacturing heartlands<\/a>.<\/p>\n<p dir=\"ltr\">Investment flows\u00a0<a href=\"https:\/\/www.palabranahj.org\/archive\/tariffs-meet-trade-reality-the-border-business-that-wont-back-down\" target=\"_blank\" rel=\"noopener\">are also beginning to slow to a trickle<\/a>, according to Cruz P\u00e9rez Cu\u00e9llar, mayor of Ju\u00e1rez,\u00a0<a class=\"tag tag-40974\" href=\"https:\/\/www.bisnow.com\/tags\/el-paso\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"40974\">El Paso<\/a>\u2019s sister city across the Rio Grande. Cu\u00e9llar said last week that foreign investors tell him they have money to spend, \u201cbut they cannot do it.\u201d<\/p>\n<p dir=\"ltr\">\u201cWe&#8217;re at risk of damaging a real good thing,\u201d said Tom Fullerton, professor of economics and finance at the University of Texas at El Paso. \u201cAnd it&#8217;ll be particularly damaging for Texas because Texas is the one state economy that is most invested and dependent upon productive trade and manufacturing arrangements with Mexico.\u201d<\/p>\n<p dir=\"ltr\">\u201cWe\u2019ve hit a vacancy rate of less than 1% in the last couple of years,\u201d Volkmer said. \u201cIt\u2019s crazy.\u201d<\/p>\n<p dir=\"ltr\">The past few weeks have created another kind of craziness.<\/p>\n<p dir=\"ltr\">The\u00a0<a class=\"tag tag-131366\" href=\"https:\/\/www.bisnow.com\/tags\/trump-administration\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"131366\">Trump administration<\/a>\u2019s first foray into tariffs in February hit neighbors to both north and south, slamming them\u00a0<a href=\"https:\/\/www.bisnow.com\/national\/news\/economy\/trump-imposes-tariffs-on-china-mexico-and-canada-127840\" target=\"_blank\" rel=\"noopener\">with a 25% charge<\/a>\u00a0on imported goods. Those were paused 36 hours later,\u00a0<a href=\"https:\/\/www.bisnow.com\/national\/news\/construction-development\/trumps-tariff-policy-causing-major-whiplash-for-cre-decisionmakers-128380\" target=\"_blank\" rel=\"noopener\">reimplemented in early March, then suspended again<\/a>.<\/p>\n<p>The April 2 flurry of reciprocal tariffs of up to 50%\u00a0<a href=\"https:\/\/www.bisnow.com\/national\/news\/commercial-real-estate\/trump-tariffs-unleash-market-chaos-price-spike-fears-128794\" target=\"_blank\" rel=\"noopener\">convulsed the economy<\/a>, though the Trump administration last week pared those back to a baseline 10% for nations other than China.\u00a0<a class=\"tag tag-42803\" href=\"https:\/\/www.bisnow.com\/tags\/the-white-house\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"42803\">The White House<\/a>\u00a0carved out a lifeline for its closest neighbors,\u00a0<a href=\"https:\/\/edition.cnn.com\/2025\/04\/03\/americas\/mexico-praises-preferential-us-tariffs-treatment-latam-intl\/index.html\" target=\"_blank\" rel=\"noopener\">continuing to exempt<\/a>\u00a0products covered by the USMCA from tariffs, even as Mexico and Canada are subject to 25% tariffs for completed automobiles as well as steel and aluminum.<\/p>\n<p dir=\"ltr\">The topsy-turvy policy is making decision-makers dizzy, and many are pausing for clarity, according to\u00a0<a class=\"tag tag-35760\" href=\"https:\/\/www.bisnow.com\/tags\/provident-realty-advisors\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"35760\">Provident Realty Advisors<\/a>\u00a0Director of Development and Acquisitions\u00a0<a class=\"tag tag-174860\" href=\"https:\/\/www.bisnow.com\/tags\/christen-vestal\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"174860\">Christen Vestal<\/a>.<\/p>\n<p dir=\"ltr\">\u201cIt does seem like leasing has slowed tremendously right now trying to wait and see what the president\u2019s going to do,\u201d Vestal said of the Laredo market at a\u00a0<em>Bisnow<\/em>\u00a0event last month<\/p>\n<p dir=\"ltr\">Provident\u00a0is expecting that to translate into lower rents for its speculative industrial developments.<\/p>\n<p dir=\"ltr\">Tariffs have already led car manufacturer\u00a0<a class=\"tag tag-191914\" href=\"https:\/\/www.bisnow.com\/national\/news\/infrastructure\/ev-battery-manufacturer-set-to-ink-7b-federal-loan-for-2-indiana-plants-127015\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"191914\">Stellantis<\/a>\u00a0to\u00a0<a href=\"https:\/\/thehill.com\/business\/5230228-stellantis-halts-production-at-assembly-plants-in-canada-mexico-after-trump-auto-tariffs\/\" target=\"_blank\" rel=\"noopener\">pause operations in Canada and Mexico<\/a>. Analysts at the\u00a0<a class=\"tag tag-122001\" href=\"https:\/\/www.bisnow.com\/tags\/federal-reserve-bank-of-dallas\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"122001\">Federal Reserve Bank of Dallas<\/a>\u00a0now estimate that Texas&#8217; GDP growth could\u00a0<a href=\"https:\/\/www.dallasfed.org\/research\/economics\/2025\/0403\" target=\"_blank\" rel=\"noopener\">slow from an average of 3.2% to 1.7%<\/a>, much of it attributable to decreased output and investment in the industrial sector along its border.<\/p>\n<p dir=\"ltr\">\u201cAs the nation\u2019s leading trading state, Texas is highly exposed to tariffs,\u201d Dallas Fed researchers Jesus Ca\u00f1as and Diego Morales-Burnett said, based on surveys of manufacturers and service providers last month. \u201cUncertainty about trade policy and the prospect of higher tariffs has partly led to dimming company outlooks.\u201d<\/p>\n<p dir=\"ltr\">A sense of chaos has set in \u2014\u00a0<a href=\"https:\/\/www.elpasotimes.com\/story\/money\/business\/2025\/03\/05\/trump-mexico-tariffs-bring-jammed-warehouses-looming-price-increases\/81446935007\/\" target=\"_blank\" rel=\"noopener\">seen in<\/a>\u00a0three-to-four-hour traffic jams at the border, overflowing warehouses and surging produce prices \u2014 and confusion is eroding new trade lines, said Tony Payan, executive director of the Center for the U.S. and Mexico at Rice University\u2019s Baker Institute for Public Policy.<\/p>\n<div class=\"banner-600x160\">\n<div id=\"special_inline_wide_skyscraper_1\" class=\"special-inline-ad\">\n<p dir=\"ltr\">Payan said tariffs will push companies to seek cost savings where they can. While they may continue operations as usual and pay them, many will start to explore whether they can shift supply chains and production to save money.<\/p>\n<p dir=\"ltr\">\u201cThey\u2019ll swallow some of the tariffs, and they\u2019ll have to calculate,\u201d Payan said. \u201c\u2018Is it better to open a\u00a0<a class=\"tag tag-31962\" href=\"https:\/\/www.bisnow.com\/tags\/toyota\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"31962\">Toyota<\/a>\u00a0plant for light vehicles in Texas or Georgia or whatever, or is it better to keep it in Mexico and pay the tariff?\u2019\u201d<\/p>\n<p dir=\"ltr\">In the best-case scenario that Trump trade policy is highly successful at spurring\u00a0<a class=\"tag tag-169533\" href=\"https:\/\/www.bisnow.com\/tags\/onshoring\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"169533\">onshoring<\/a>\u00a0to the U.S., the future of border industrial markets hangs in the balance,\u00a0<a class=\"tag tag-103360\" href=\"https:\/\/www.bisnow.com\/tags\/moodys-analytics\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"103360\">Moody&#8217;s Analytics<\/a>\u00a0Chief Economist\u00a0<a class=\"tag tag-176537\" href=\"https:\/\/www.bisnow.com\/tags\/ermengarde-jabir\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"176537\">Ermengarde Jabir<\/a>\u00a0warned.<\/p>\n<p dir=\"ltr\">\u201cThe tariffs [could] cause such a push for domestic manufacturing that those warehouses along the border might not be in as high demand as they have been,\u201d Jabir said.<\/p>\n<\/div>\n<\/div>\n<h4 dir=\"ltr\">Uncertainty Grinds Decisions To A Halt<\/h4>\n<p>Trade value along the Texas-Mexico border in cities like Laredo, El Paso, Hidalgo and Brownsville hit $540B last year, a 40% increase from five years earlier, according to Savills. Developers clamored to build along the 1,254-mile stretch in the wake of the\u00a0<a class=\"tag tag-154363\" href=\"https:\/\/www.bisnow.com\/tags\/usmca\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"154363\">USMCA<\/a>, boosting new industrial inventory by 18% over that same period as rents soared and vacancy plummeted.<\/p>\n<p>In Laredo, logistics investment soared from just $16.8M in 2012 to $313.5M by 2023. 2024 was another banner year for megabucks projects, including a $1B distribution center, warehouse and manufacturing port from\u00a0<a class=\"tag tag-5248\" href=\"https:\/\/www.bisnow.com\/tags\/majestic-realty-co\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"5248\">Majestic Realty Co<\/a>. and a 1M SF spec industrial project from SE Legacy Development that is part of a larger $7B development.<\/p>\n<p dir=\"ltr\">\u201cWe\u2019ve hit a vacancy rate of less than 1% in the last couple of years,\u201d Volkmer said. \u201cIt\u2019s crazy.\u201d<\/p>\n<p dir=\"ltr\">The past few weeks have created another kind of craziness.<\/p>\n<p dir=\"ltr\">The\u00a0<a class=\"tag tag-131366\" href=\"https:\/\/www.bisnow.com\/tags\/trump-administration\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"131366\">Trump administration<\/a>\u2019s first foray into tariffs in February hit neighbors to both north and south, slamming them\u00a0<a href=\"https:\/\/www.bisnow.com\/national\/news\/economy\/trump-imposes-tariffs-on-china-mexico-and-canada-127840\" target=\"_blank\" rel=\"noopener\">with a 25% charge<\/a>\u00a0on imported goods. Those were paused 36 hours later,\u00a0<a href=\"https:\/\/www.bisnow.com\/national\/news\/construction-development\/trumps-tariff-policy-causing-major-whiplash-for-cre-decisionmakers-128380\" target=\"_blank\" rel=\"noopener\">reimplemented in early March, then suspended again<\/a>.<\/p>\n<p>The April 2 flurry of reciprocal tariffs of up to 50%\u00a0<a href=\"https:\/\/www.bisnow.com\/national\/news\/commercial-real-estate\/trump-tariffs-unleash-market-chaos-price-spike-fears-128794\" target=\"_blank\" rel=\"noopener\">convulsed the economy<\/a>, though the Trump administration last week pared those back to a baseline 10% for nations other than China.\u00a0<a class=\"tag tag-42803\" href=\"https:\/\/www.bisnow.com\/tags\/the-white-house\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"42803\">The White House<\/a>\u00a0carved out a lifeline for its closest neighbors,\u00a0<a href=\"https:\/\/edition.cnn.com\/2025\/04\/03\/americas\/mexico-praises-preferential-us-tariffs-treatment-latam-intl\/index.html\" target=\"_blank\" rel=\"noopener\">continuing to exempt<\/a>\u00a0products covered by the USMCA from tariffs, even as Mexico and Canada are subject to 25% tariffs for completed automobiles as well as steel and aluminum.<\/p>\n<p dir=\"ltr\">The topsy-turvy policy is making decision-makers dizzy, and many are pausing for clarity, according to\u00a0<a class=\"tag tag-35760\" href=\"https:\/\/www.bisnow.com\/tags\/provident-realty-advisors\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"35760\">Provident Realty Advisors<\/a>\u00a0Director of Development and Acquisitions\u00a0<a class=\"tag tag-174860\" href=\"https:\/\/www.bisnow.com\/tags\/christen-vestal\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"174860\">Christen Vestal<\/a>.<\/p>\n<p dir=\"ltr\">\u201cIt does seem like leasing has slowed tremendously right now trying to wait and see what the president\u2019s going to do,\u201d Vestal said of the Laredo market at a\u00a0<em>Bisnow<\/em>\u00a0event last month<\/p>\n<p dir=\"ltr\">Provident\u00a0is expecting that to translate into lower rents for its speculative industrial developments.<\/p>\n<p dir=\"ltr\">Tariffs have already led car manufacturer\u00a0<a class=\"tag tag-191914\" href=\"https:\/\/www.bisnow.com\/national\/news\/infrastructure\/ev-battery-manufacturer-set-to-ink-7b-federal-loan-for-2-indiana-plants-127015\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"191914\">Stellantis<\/a>\u00a0to\u00a0<a href=\"https:\/\/thehill.com\/business\/5230228-stellantis-halts-production-at-assembly-plants-in-canada-mexico-after-trump-auto-tariffs\/\" target=\"_blank\" rel=\"noopener\">pause operations in Canada and Mexico<\/a>. Analysts at the\u00a0<a class=\"tag tag-122001\" href=\"https:\/\/www.bisnow.com\/tags\/federal-reserve-bank-of-dallas\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"122001\">Federal Reserve Bank of Dallas<\/a>\u00a0now estimate that Texas&#8217; GDP growth could\u00a0<a href=\"https:\/\/www.dallasfed.org\/research\/economics\/2025\/0403\" target=\"_blank\" rel=\"noopener\">slow from an average of 3.2% to 1.7%<\/a>, much of it attributable to decreased output and investment in the industrial sector along its border.<\/p>\n<p dir=\"ltr\">\u201cAs the nation\u2019s leading trading state, Texas is highly exposed to tariffs,\u201d Dallas Fed researchers Jesus Ca\u00f1as and Diego Morales-Burnett said, based on surveys of manufacturers and service providers last month. \u201cUncertainty about trade policy and the prospect of higher tariffs has partly led to dimming company outlooks.\u201d<\/p>\n<p dir=\"ltr\">A sense of chaos has set in \u2014\u00a0<a href=\"https:\/\/www.elpasotimes.com\/story\/money\/business\/2025\/03\/05\/trump-mexico-tariffs-bring-jammed-warehouses-looming-price-increases\/81446935007\/\" target=\"_blank\" rel=\"noopener\">seen in<\/a>\u00a0three-to-four-hour traffic jams at the border, overflowing warehouses and surging produce prices \u2014 and confusion is eroding new trade lines, said Tony Payan, executive director of the Center for the U.S. and Mexico at Rice University\u2019s Baker Institute for Public Policy.<\/p>\n<p dir=\"ltr\">Payan said tariffs will push companies to seek cost savings where they can. While they may continue operations as usual and pay them, many will start to explore whether they can shift supply chains and production to save money.<\/p>\n<p dir=\"ltr\">\u201cThey\u2019ll swallow some of the tariffs, and they\u2019ll have to calculate,\u201d Payan said. \u201c\u2018Is it better to open a\u00a0<a class=\"tag tag-31962\" href=\"https:\/\/www.bisnow.com\/tags\/toyota\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"31962\">Toyota<\/a>\u00a0plant for light vehicles in Texas or Georgia or whatever, or is it better to keep it in Mexico and pay the tariff?\u2019\u201d<\/p>\n<p dir=\"ltr\">In the best-case scenario that Trump trade policy is highly successful at spurring\u00a0<a class=\"tag tag-169533\" href=\"https:\/\/www.bisnow.com\/tags\/onshoring\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"169533\">onshoring<\/a>\u00a0to the U.S., the future of border industrial markets hangs in the balance,\u00a0<a class=\"tag tag-103360\" href=\"https:\/\/www.bisnow.com\/tags\/moodys-analytics\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"103360\">Moody&#8217;s Analytics<\/a>\u00a0Chief Economist\u00a0<a class=\"tag tag-176537\" href=\"https:\/\/www.bisnow.com\/tags\/ermengarde-jabir\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"176537\">Ermengarde Jabir<\/a>\u00a0warned.<\/p>\n<p dir=\"ltr\">\u201cThe tariffs [could] cause such a push for domestic manufacturing that those warehouses along the border might not be in as high demand as they have been,\u201d Jabir said.<\/p>\n<h4>Long-Term Pain Or Opportunity?<\/h4>\n<p>Industrial growth along the border first started to pick up steam in the late 1980s when Mexico joined the World Trade Organization, according to Fullerton. Its\u00a0<a href=\"https:\/\/www.sandiego.gov\/economic-development\/sandiego\/trade\/mexico\/maquiladoras#:~:text=Maquiladoras%20(also%20known%20as%20%22twin,business%20in%20the%20United%20States.\" target=\"_blank\" rel=\"noopener\">maquiladoras, or \u201ctwin plants,\u201d industry<\/a>\u00a0capitalizes on the less expensive labor force in Mexico and the benefits of doing business in the United States.<\/p>\n<p>The region got a jolt of adrenaline when the pandemic upended supply chains, followed by two consecutive U.S. presidents enacting trade policies\u00a0 \u2014 one\u00a0<a href=\"https:\/\/apnews.com\/article\/trump-tariff-justifications-50f0b4416234e63c7136eaa5c5f96759\" target=\"_blank\" rel=\"noopener\">with a stick<\/a>\u00a0and one\u00a0<a href=\"https:\/\/www.reuters.com\/markets\/us\/biden-sign-order-52-billion-chips-law-implementation-2022-08-25\/\" target=\"_blank\" rel=\"noopener\">with a carrot<\/a>\u00a0\u2014 designed to incentivize companies to bring production back to North America.<\/p>\n<p>But the surge in industrial development along the Texas-Mexico border really stems from economic competition between the U.S. and China.<\/p>\n<p dir=\"ltr\">\u201cIn the beginning, it was all about China,\u201d Payan said. \u201cA lot of companies on the border, on both sides, began to say, \u2018This is going to be a great opportunity as the U.S. delinks and then eventually decouples its economy from China&#8217;s.\u2019\u201d<\/p>\n<p dir=\"ltr\">A dozen Chinese auto manufacturing plants have been set up in Mexico since 2019. Auto parts manufacturers and car makers accounted for just under half of the more than $14B invested there by Chinese corporations,\u00a0<a href=\"https:\/\/prosperousamerica.org\/chinas-auto-sector-is-moving-to-mexico-29-new-manufacturing-plants-set-up-since-march-2023\/\" target=\"_blank\" rel=\"noopener\">according to a report from the Coalition for a Prosperous America<\/a>.<\/p>\n<p dir=\"ltr\">So far, most\u00a0<a class=\"tag tag-131985\" href=\"https:\/\/www.bisnow.com\/tags\/automakers\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"131985\">automakers<\/a>\u00a0appear to be\u00a0<a href=\"https:\/\/www.aol.com\/news\/most-automakers-stay-put-mexico-153152057.html\" target=\"_blank\" rel=\"noopener\">riding out the turmoil<\/a>. But even before new tariffs hit, direct foreign investment in Mexican manufacturing was declining,\u00a0<a href=\"https:\/\/mexiconewsdaily.com\/news\/fdi-mexico-2024\/#:~:text=New%20investment%20declined%20more%20than,the%20preliminary%20total%20for%202023.\" target=\"_blank\" rel=\"noopener\">dropping more than 30% in 2024<\/a>\u00a0over the previous year. That could continue, hitting industrial markets along the Rio Grande Valley and the rest of the border where it hurts, especially if trade agreements are renegotiated, Fullerton said.<\/p>\n<p dir=\"ltr\">\u201cIf\u00a0USMCA\u00a0gets discarded, we&#8217;re going to have a lot of excess capacity on the south side of the border, and that may translate into excess capacity on the north side of the border as well,\u201d he said.<\/p>\n<p>Some of that capacity could be soaked up by additional domestic manufacturing, warehousing and transportation activities if bringing production home becomes top priority, he said. Texas\u2019 comparatively cheap labor market, lax environmental regulations and weaker worker protections work in its favor in that scenario.<\/p>\n<p>\u201cTexas is going to be an ideal place if you want to shift all or partial production to the north side of the river,\u201d Payan said. \u201cThen the valley looks very good, and El Paso looks very good, and Laredo looks very good.\u201d<\/p>\n<p>South Texas is a poor area with a lot of people willing to work for less money. Compared to the nationwide average of $31.48 per hour, the average hourly wage in Laredo was $21.79 in May 2023,\u00a0<a href=\"https:\/\/www.bls.gov\/regions\/southwest\/news-release\/occupationalemploymentandwages_laredo.htm#:~:text=Workers%20in%20the%20Laredo%2C%20TX,of%20Labor%20Statistics%20reported%20today.\" target=\"_blank\" rel=\"noopener\">according to<\/a>\u00a0the U.S.\u00a0<a class=\"tag tag-104535\" href=\"https:\/\/www.bisnow.com\/tags\/bureau-of-labor-statistics\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"104535\">Bureau of Labor Statistics<\/a>. In El Paso, the average wage was $22.67. In McAllen, it was $20.98.<\/p>\n<p>But while the Trump administration\u2019s tariff motives remain mysterious, they are presumably designed to change things quickly. And supply chain changes don&#8217;t just happen on a dime: The manufacturing industry is more cruise ship than speed boat, Payan said.<\/p>\n<p>\u201cIt turns very slowly,\u201d he said. \u201cBusinesses have to begin to make these very, very long-term business calculations. Then if [the tariffs] go away later, they have to reverse.\u201d<\/p>\n<h4>\u2018Pragmatism Is Going To Win Out\u2019<\/h4>\n<p>With so much riding on border trade, including hundreds of millions of dollars in projects already announced this year, there\u2019s a sense that a fix \u201cjust has to happen,\u201d Volkmer said.<\/p>\n<div class=\"banner-600x160\">\n<div id=\"special_inline_wide_skyscraper_2\" class=\"special-inline-ad\">\n<p dir=\"ltr\">Laredo in particular has become so central to trade that the Mexican National Customs Agency last year\u00a0<a href=\"https:\/\/www.kgns.tv\/2024\/09\/20\/nuevo-laredo-open-mexicos-largest-customs-office\/\" target=\"_blank\" rel=\"noopener\">moved its headquarters to Nuevo Laredo<\/a>, its twin city just across the border.<\/p>\n<p dir=\"ltr\">\u201cIt\u2019s like moving the U.S.\u00a0<a class=\"tag tag-48041\" href=\"https:\/\/www.bisnow.com\/tags\/commerce-department\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"48041\">Commerce Department<\/a>\u00a0from Washington, D.C., to Laredo,\u201d Killam said. \u201cIt\u2019s a big deal. It sends a strong signal.\u201d<\/p>\n<p dir=\"ltr\">Laredo\u2019s 5.7 million truck container crossings outpaced all border markets in 2024. Its logistics properties saw the\u00a0<a href=\"https:\/\/www.matthews.com\/wp-content\/uploads\/2024\/09\/South-Texas-Industrial-Market-Report.pdf\" target=\"_blank\" rel=\"noopener\">greatest increases in rent growth among border markets\u00a0<\/a>\u2014 2.5% \u2014 over the 12 months leading up to the third quarter\u00a0of last year, according to\u00a0<a class=\"tag tag-161124\" href=\"https:\/\/www.bisnow.com\/tags\/matthews-real-estate-investment-services\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"161124\">Matthews Real Estate Investment Services<\/a>.<\/p>\n<p dir=\"ltr\">Like other border markets, vacancy is far below the national average.<\/p>\n<div class=\"row row-article specialReportTemplate__article-container\">\n<div class=\"specialReportTemplate__wrapper\">\n<p dir=\"ltr\">\u201cI believe with time, in May, we\u2019re all going to be singing a different tune and it\u2019s going to be a happy tune because the relationship between Mexico and the United States goes both ways,\u201d Volkmer said. \u201cWe need them. They need us.\u201d<\/p>\n<p>Despite its small size \u2014 Laredo\u2019s industrial inventory of about 43M SF is a small fraction of Houston\u2019s 600M SF \u2014 it punches far above its weight. Under-construction space in Texas border markets reached 7.3% of total inventory, one of the highest rates in the U.S. last year, and Laredo and El Paso accounted for 99% of that, per Savills.<\/p>\n<p dir=\"ltr\">\u201cRelative to other markets in Texas, it is certainly on the smaller side,\u201d\u00a0<a class=\"tag tag-84282\" href=\"https:\/\/www.bisnow.com\/tags\/triten-real-estate-partners\" target=\"_blank\" rel=\"noopener\" data-tag-id=\"84282\">Triten Real Estate Partners<\/a>\u00a0principal David Shipman said. \u201cBut you are starting to see Laredo get way more competitive. You\u2019re starting to see institutional capital develop.\u201d<\/p>\n<p>Triten closed on its first Laredo investments, two small industrial buildings, in the past three months. Like so many others, it was lured to the area by the nearshoring trend.<\/p>\n<p>Provident announced the construction of the fourth phase of its Gateway Logistics Park in El Paso earlier this year. Its\u00a0next wave of construction will add three Class-A industrial buildings and bring the park\u2019s total square footage to more than 1.4M SF.<\/p>\n<p>\u201cThe secret\u2019s kind of out,\u201d Provident Industrial Southwest Director Chris Martin said.<\/p>\n<p>In the past two to three months, Killam has seen about 1M SF in the Laredo market lease up. Killam Development itself has a 200K SF warehouse under construction that was fully leased just in the past few weeks.<\/p>\n<p>The activity gives Killam confidence that whether the tariffs are permanent or temporary, businesses will adjust to keep operations and supply chains in North America.<\/p>\n<p dir=\"ltr\">\u201cThese are not things that will change on a whim,\u201d he said.<\/p>\n<p dir=\"ltr\">Border industrial players say they can absorb some tariffs, and they are used to brushing off trade policy changes that happen every four years. Twenty-five percent levies won\u2019t be enough to change the way products are manufactured.<\/p>\n<p dir=\"ltr\">\u201cIf it was 50%, yes, that would change the total landscape,\u201d Vestal said.<\/p>\n<p dir=\"ltr\">Even Laredo\u2019s biggest boosters admit times are rocky. But they hope there\u2019s too much on the line for the boom not to continue booming.<\/p>\n<p dir=\"ltr\">\u00a0\u201cUltimately, pragmatism is going to win out,\u201d Killam said.<\/p>\n<div class=\"banner-600x160\">\n<div id=\"special_inline_wide_skyscraper_3\" class=\"special-inline-ad\"><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n<h4><em>This <a href=\"https:\/\/www.bisnow.com\/houston\/news\/commercial-real-estate\/lee-and-associates-cre-ownership-structure-houston-brokers-and-clients-studiob-127715\">article<\/a> was produced in collaboration between Lee &amp; Associates and Studio B. Bisnow news staff was not involved in the production of this content.<\/em><\/h4>\n<h4><em>Studio B is Bisnow\u2019s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.<\/em><\/h4>\n<h4><em>Contact Elizabeth Reyn at <a href=\"mailto:elizabeth.reyn@bisnow.com\">elizabeth.reyn@bisnow.com<\/a><\/em><\/h4>\n<p>&nbsp;<\/p>\n<h4><strong><em>See original Article <a href=\"https:\/\/www.bisnow.com\/houston\/news\/commercial-real-estate\/lee-and-associates-cre-ownership-structure-houston-brokers-and-clients-studiob-127715\">Here<\/a><\/em><\/strong><\/h4>\n<h5><\/h5>\n<h5><em><br \/>\n<strong><u>About Lee &amp; Associates \u2013 Houston<\/u><\/strong><\/em><\/h5>\n<p>Lee &amp; Associates \u2013 Houston is a fully-integrated commercial real estate company with unrivaled market knowledge and an unwavering commitment to integrity and excellence. Our business-minded brokers specialize in office, industrial, and land real estate investments. Lee &amp; Associates \u2013 Houston is part of a nationwide network of brokers in more than 80 offices in North America. The brokerage is uniquely qualified to support our client\u2019s real estate needs in Houston, across Texas, and throughout the US. For more information, visit <a href=\"http:\/\/www.lee-associates.com\/houston\/\">lee-associates.com\/houston<\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>&nbsp; April 13, 2025 | HOUSTON, TEXAS | Maddy McCarty and Billy Wadsack &nbsp; Lee &amp; Associates\u2019\u00a0Enrique Volkmer\u00a0calls himself \u201cthe happiest guy in town\u201d after returning to his hometown of Laredo in 2016 to broker real estate deals for third-party logistics companies and other industrial tenants. In just the first two months of this year, Volkmer racked up 11 new lease signings. Those deals have become exponentially bigger and more plentiful since the United States-Mexico-Canada&#8230;<\/p>\n","protected":false},"author":223,"featured_media":10434,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-10323","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.6 (Yoast SEO v28.6) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Border Boom Could Bust: How Tariffs Risk &#039;Damaging A Real Good Thing&#039; - Lee &amp; Associates | Houston<\/title>\n<meta name=\"description\" content=\"Laredo has evolved into an industrial real estate powerhouse over the past half-decade, but it&#039;s growth is being threatened by tariffs.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.lee-associates.com\/houston\/2025\/05\/05\/border-boom-could-bust-how-tariffs-risk-damaging-a-real-good-thing\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Border Boom Could Bust: How Tariffs Risk &#039;Damaging A Real Good Thing&#039;\" \/>\n<meta property=\"og:description\" content=\"Laredo has evolved into an industrial real estate powerhouse over the past half-decade, but it&#039;s growth is being threatened by tariffs.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.lee-associates.com\/houston\/2025\/05\/05\/border-boom-could-bust-how-tariffs-risk-damaging-a-real-good-thing\/\" \/>\n<meta property=\"og:site_name\" content=\"Lee &amp; 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