January 30, 2023

See Correction/Clarification at end of article
More than 2 million square feet of speculative industrial space could eventually be built in the fast-growing manufacturing and warehouse corridor that’s taken shape between Austin and San Antonio.
But first, developers hope to break ground a little more than a year from now on hundreds of thousands of square feet — the first stage in what may become a large employment and distribution hub.
It will all be part of a massive mixed-use development planned for San Marcos, located about 30 miles south of downtown Austin in Hays County, which ranks among the fastest-growing cities in the country.
In the past two months, Arizona-based Walton Global Holdings LLC and Southern California-based Majestic Realty Co. have secured approvals, including for rezoning and incentives, from both the city and county to build on roughly 400 acres on Centerpoint Road, east of I-35 and San Marcos’ outlet malls.
It will include a large industrial park being developed by Majestic that was approved for incentives under the name “Project Thin Mint.”
Company executives said in a statement that they plan to start construction in the first quarter of 2024 on two buildings that total about 200,000 square feet. The incentives are for a minimum of 800,000 square feet of spec development. And execs say the site could eventually top 2 million square feet.
The development will rise in the middle of a rapidly changing part of Central Texas. San Marcos had an estimated population of 68,580 in 2021, up from 44,894 in 2010, while Hays County grew from 157,107 to 255,397 during the same time period, according to the U.S. Census Bureau. Experts point to this region becoming the state’s next huge metroplex, as the growth of both Austin and San Antonio funnel people and businesses into the corridor in search of cheaper housing and new opportunities.
While many details about the project are still in flux, the co-developers have achieved significant milestones in the past couple of months.
Walton, which manages more than $3.6 billion worth of real estate in North America, on Aug. 2 was approved by San Marcos City Council for rezoning about 400 acres for what’s being called the Gas Lamp District.
On its website, the company says the property “is planned for a mix of residential offerings, commercial, industrial and retail uses. It will also incorporate ample open spaces and parks connected by jogging, hiking and biking trails.”
That incudes 200 acres of industrial space being developed by Majestic Realty, which also developed the Kyle Crossing Business Park, where tenants include Amazon.com Inc. and Lowe’s Co. Inc.
In a Sept. 21 statement, Majestic said it was “excited about the opportunity to partner with the City of San Marcos” to create the industrial park.
Walton did not immediately respond to a request for comment.
On Sept. 6, the San Marcos Council approved a Chapter 380 incentives agreement for the project, which provides a three-year, 50% property tax rebate per building for a maximum of 10 years. The property tax rebate is only eligible for unoccupied parts of the development — meaning an occupied building would not be eligible.
City officials estimated the return on investment for the incentives could exceed $1.5 million.
Majestic estimated the capital investment for the development will be $41 million over the first five years and $103 million over a 10-year period.
Full buildout could last through Q4 2033.
Execs noted that the company initially promised 2.6 million square feet of development and $177 million in capital investment, but scaled back because of potential market volatility.
“There is a strong market demand for ready industrial space. We’ve seen a lot of this as a result of the pandemic with supply chain disruptions and companies wanting to have more control over their manufacturing processes and managing inventory,” said Hayden Migl, San Marcos assistant to the city manager. “This can allow for additional flexibility during this time when there are a lot of market forces potentially changing in the next 18-24 months and allows more consistency with budgeting future city funds and providing additional space that will serve to house new businesses in San Marcos.”
San Marcos and Hays County have attracted a lot of industrial development in recent years, as companies search for cheaper land and open space in the Austin area. A lot of the projects are being built on spec, which means no company has yet committed to the space.
Alliance Industrial Co. says it is building the first-ever spec project of at least 1 million square feet between Austin and San Antonio.
Employers that have flocked to the area include Redbird Flight Simulations Inc., a manufacturer of flight simulation equipment; Plastikon Industries Inc., a plastic parts manufacturer that supplies Tesla Inc. and Toyota Motor Corp.; Simwon North America Corp., also reportedly a Tesla supplier; and ENF Technology Co. Ltd., which makes chemicals used in semiconductor production.
Recent research from Partners found that industrial vacancy in the Austin area increased slightly to 3.8% in the second quarter, up from 3.3% in Q1 but still historically tight — the rate was 6% a year ago.
San Marcos City Council Member Maxfield Baker, the sole vote against the incentives, said during the Sept. 6 meeting that the high demand for space and the company’s reduction in the project size represent a “contradiction.”
“If that’s the case, we’ve approved how many spec buildings over this past year this alone?” he said.
Al Sorrels, Texas-based senior vice president for Majestic Realty, said the changes were made to hit minimums required by the incentives applications, adding that the company did not want to lock in to a higher number because of potential escalation of costs. He said the projected budget accounts to $60-80 per square foot, along with infrastructure that includes new and upgraded roads and offsite utilities.
“So if you didn’t hit that number, it would nullify your incentive,” Sorrels said. “With that understanding of those numbers not being just a projected budget and a bare minimum, that would act as a nullification of the incentive. … That’s the reason they were modified. It’s not modified really because we don’t believe we’ll build that amount, it’s modified because that’s a bare minimum and in today’s world you don’t know what tomorrow is going to bring. If it’s a minimum we want to put very conservative estimates in there.”
The Hays County Commissioners Court approved incentives on Sept. 20. The Chapter 381 economic development agreement with Majestic Realty provides a similar 50% property tax rebate. That property tax rebate fluctuates based on whether or not the space remains leased.
“In summary, we’re going to help offset an empty building but we have the idea it will not be vacant,” Hays County Judge Ruben Becerra said during the meeting.
This story has been updated to provide the correct size of property tax rebates approved by the Hays County Commissioners Court and to accurately describe where Walton Global invests in real estate.
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