Borderlands: Developers capitalizing on booming California-Mexico trade

Borderlands is a weekly rundown of developments in the world of United States-Mexico cross-border trucking and trade. This week: A development is capitalizing on the booming California-Mexico trade; the Port of Galveston will receive $11 million for a channel dredging project; a Canadian auto components maker expands its Mexican plant; and Border Patrol rescues migrants locked in a railcar.

Landmark at Otay development capitalizing on booming California-Mexico trade

The area near the Otay Mesa port of entry continues to be a Southern California industrial real estate hot spot.

Developer Majestic Realty Co. has begun construction on the second phase of its Landmark at Otay development being built near the U.S.-Mexico border just south of San Diego.

“Demand for real estate in the Otay Mesa area is white hot right now,” Tom Simmons, vice president of Los Angeles-based Majestic Realty Co., told FreightWaves.

The San Diego/Otay Mesa market is reaching “historic levels” of demand for industrial real estate, according to market research from Marcus and Millichap.

“San Diego’s industrial sector entered 2022 on a high note after users absorbed 6.4 million square feet in the second half of last year — a figure that exceeded the total from the prior 15 quarters,” Marcus & Millichap said. “Heightened demand for warehouse and distribution space near the U.S.-Mexico border fueled this strong level of absorption with e-commerce retailers and logistics providers inking leases in Otay Mesa.”

Marcus and Millichap said Otay Mesa vacancy rates are below 3%, compared to the national vacancy rate average of 5.2%. The average rent in the area is forecast to be about $17.75 per square foot in 2022.

Simmons said another reason they are seeing increased demand in the area is because availability is running out.

“San Diego is running out of real estate,” Simmons said. “It has some significant geographical constraints; obviously you have the Pacific Ocean in the west and you have the border to the south. There’s also significant terrain from essentially mountains to the east and then Camp Pendleton military installation, which is on the northern boundary of San Diego County.”

The Landmark at Otay near San Diego. (Photo: Majestic Realty Co.)

The Otay Mesa port of entry totaled more than $50 billion in trade in 2021. It ranked as the second-busiest Mexico border crossing last year with more than 936,000 commercial trucks. The top commercial land crossing with Mexico in 2021 was Laredo, Texas, processing more than 2.5 million trucks.

The Otay Mesa port of entry is also undergoing a $1.1 billion expansion to build a third port of entry in the area, which will be known as Otay Mesa East or Otay II. The nearby San Ysidro port of entry processes passenger vehicles only.

Otay II will create a new crossing 3 miles east of the original Otay Mesa port of entry. Otay II will include 10 lanes, five for passenger vehicles and five for cargo transport.

The goal is to reduce wait times for trucks at the Otay Mesa border crossing to a 20-minute average. Current wait times average 150 minutes for commercial vehicles. Otay II is scheduled to be completed in 2024.

Simmons said Majestic Realty Co. and Sunroad Enterprises have begun construction on the second phase of Landmark at Otay to take advantage of the increased demand for space.

Phase II construction is taking place on 50 acres of the 67-acre development and includes a 240,975-square-foot building and 235,085-square-foot building. Both facilities will feature 36-foot ceiling clearance and 185-foot truck courtyard with individual trailer storage.

Each building will also include parking for 51 trailers, 40 dock-high doors, and two ground-level doors with ramps. Construction is scheduled for completion in February 2023. Tenants at Landmark at Otay already include Global Logistics & Fulfillment, Exportalia, Avanza Loop, and Terry Town.

“We are seeing a lot of interest from cross-border companies,” Simmons said. “If everything goes according to plan and the new Otay border crossing opens in 2024, that will add another commercial border crossing to serve the California market and we’re seeing these cross-border companies make sure they’re getting their investments in now.”

FreightWaves’ SONAR platform shows the West Coast regional tender rejection rates (OTRI.URWT) have plummeted as carriers rush to Southern California to take advantage of elevated truckload rates, miles and volumes.

Tender rejection rates measure the rate at which trucking companies accept their electronically submitted load requests from their contracted shippers. Since the beginning of January, tender rejection rates have fallen from near 19% to 4% on the West Coast.

Since the beginning of January, tender rejection rates have fallen from near 19% to 4% in the West. *To learn more about FreightWaves SONAR,* *click here*.

Port of Galveston to receive $11M for channel dredging project

The Port of Galveston will be able to reach its full economic and commercial potential as a deepwater port with funds from the federal Infrastructure Investment and Jobs Act (IIJA), officials said.

The IIJA includes $11 million in funding for dredging to extend and maintain the Galveston ship channel to a depth of 46 feet.

“This federal commitment is a game changer for the Galveston Wharves, its tenants and private operators on the channel,” Rodger Rees, CEO and port director of the Galveston Wharves, said in a statement.

The dredging project will extend the 46-foot depths to the end of the Galveston ship channel, allowing vessels calling on privately operated terminals along the final 2,500 feet of the channel to access the permitted depths. The IIJA also includes $25 million for 2023 maintenance.

“This channel extension and maintenance project will increase cargo activity, strengthen the port’s competitiveness, create more and better jobs, improve operational safety and reduce emissions,” Rees said. “The deepened channel will be able to accommodate larger vessels, which is important as ships continue to increase in size.”

The dredging project is scheduled to be completed by the end of 2023. The Port of Galveston ended 2021 with total commercial cargo of 5 million tons, its highest total since 2016.

Canadian auto components maker expands Mexican plant

ABC Technologies recently announced a $40 million expansion of its auto components manufacturing facility in Ramos Arizpe, Mexico.

The expansion will include creating 170 jobs and adding 53 plastic injection machines in the factory. The plant currently employs about 429 people. The expansion is scheduled to be completed by the end of the year.

Toronto-based ABC Technologies (TSX: ABCT) is a Tier 1 manufacturer and supplier of custom plastics and components for the North American auto industry, with clients such as Ford, GM, Nissan, Honda and Stellantis.

ABC Technologies has 28 manufacturing facilities in North America, Europe and Asia. The company employs more than 6,150 people.

Border Patrol rescues migrants locked in railcar

U.S. Border Patrol agents rescued 50 undocumented migrants from inside a locked railroad car Tuesday in Del Rio, Texas.

Border Patrol officials from the agency’s Del Rio sector were inspecting railcars parked on tracks near Eagle Pass when they reportedly found 50 undocumented migrants locked inside.

The migrants were identified as 41 Honduran nationals and nine Mexican nationals. They were arrested and transported to a processing facility.

“Migrants are not always aware of the dangers associated with tactics like these,” said Jason D. Owens, Border Patrol’s chief patrol agent for the Del Rio sector. “With high temperatures, and summer rapidly approaching, the consequences could be deadly.”