El Paso is in the midst of a construction boom driven by the nearshoring revolution, industrial expansion near the ports of entry, and major infrastructure investments. Developers are planning more than 5 million square feet of new industrial and logistics space near the Ysleta-Zaragoza and Santa Teresa crossings. The city's 250-acre Advanced Manufacturing District is expected to create 17,000 jobs. A 6.1-mile I-10 corridor reconstruction project is reshaping the city's transportation infrastructure. And the new El Paso Water headquarters, designed as a model for conservation and green building, is set for completion in spring 2026.
For developers seeking to build in El Paso, the construction lending environment offers a meaningful cost advantage. Commercial building costs average approximately $100 per square foot, nearly half the national average of $195. Labor costs run approximately 15% below the national baseline. And with only 45 rain days per year, weather-related construction delays are far less frequent than in most U.S. markets.
This guide covers everything you need to know about construction loans in El Paso, from loan programs and rates to the draw process, local building requirements, and strategies for different project types.
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Why Is El Paso Attracting So Much New Construction?
El Paso's construction boom is driven by several converging forces that create demand for new commercial buildings across multiple property types.
The nearshoring wave is the primary catalyst for industrial construction. Mexico surpassed China as America's largest trading partner in 2023, with bilateral trade exceeding $505 billion in 2024. The Juarez industrial market expanded 40% over four and a half years, from 71 million to 100 million square feet. This explosive growth across the border is creating spillover demand for U.S.-side distribution, warehousing, and logistics facilities. Developers including Trammell Crow, Barings, and Sansone Group are building millions of square feet of new industrial space near the ports of entry.
The 250-acre Advanced Manufacturing District represents El Paso's next economic frontier. The region received $40 million in federal funds to develop a manufacturing cluster focused on aerospace and defense. This district is expected to create 17,000 jobs and will require new industrial, office, and support commercial buildings.
Major infrastructure investments are reshaping the city's physical environment. The I-10 corridor project, covering 6.1 miles through central El Paso, will add lanes, reconstruct main lanes, and improve connectivity. This infrastructure upgrade enhances accessibility for new commercial development along the corridor.
Fort Bliss continues to drive construction demand for military housing, retail, and commercial services. With over $5 billion invested in base infrastructure, the military presence sustains a steady pipeline of construction activity in the Northeast submarket.
For a complete overview of the El Paso commercial real estate landscape, visit our El Paso commercial loans hub.
What Types of Construction Loans Are Available in El Paso?
El Paso developers have access to several construction financing structures, each designed for different project types and borrower profiles.
Ground-up construction loans fund the entire building process from site preparation through certificate of occupancy. Rates typically run SOFR plus 275 to 475 basis points, translating to approximately 7.0% to 8.5% as of early 2026. Loan-to-cost ratios range from 65% to 75%, meaning you need 25% to 35% equity in the project. Most El Paso lenders structure these as 12 to 36 month terms with interest-only payments during construction.
Construction-to-permanent loans offer a single closing that covers both the building phase and the long-term mortgage. This structure eliminates the need to refinance after construction, saving on closing costs and reducing the risk of rate changes between construction completion and permanent financing. These are particularly popular for owner-occupied commercial properties and build-to-suit industrial projects in El Paso.
SBA 504 construction loans deserve special attention for El Paso business owners building their own facilities. The SBA 504 program allows loan-to-cost ratios up to 90%, with below-market fixed rates on the CDC portion. For a manufacturer building a 50,000 square foot facility near the ports of entry, this program dramatically reduces the upfront capital requirement from 25% to 35% down to as little as 10%.
Renovation and rehab loans fund the transformation of existing El Paso properties. With the city offering 17 downtown properties for adaptive reuse and growing interest in converting older buildings to mixed-use developments, renovation financing is increasingly relevant. Rates run SOFR plus 300 to 500 basis points with loan-to-cost ratios of 70% to 80%.
Bridge-to-construction loans fund land acquisition and entitlement before the main construction loan closes. This two-phase approach is common for El Paso projects where the developer needs to secure the site, obtain zoning approvals, and complete plans before qualifying for the full construction loan.
How Much Does It Cost to Build Commercial Property in El Paso?
El Paso offers one of the most cost-effective construction environments in the Southwest, with meaningful advantages over both national averages and many peer Texas markets.
Commercial construction costs in El Paso average approximately $100 per square foot for standard commercial buildings, compared to the national average of $195 per square foot. This 49% cost advantage is driven by El Paso's lower labor costs (the local construction labor cost index sits at 85 versus a national baseline of 100), proximity to building material suppliers in both the U.S. and Mexico, and the general affordability of doing business in the El Paso metro.
However, costs vary significantly by property type. Industrial and warehouse construction runs $65 to $100 per square foot, making it the most affordable commercial construction category. Garden-style multifamily apartments cost $120 to $160 per square foot. Retail and strip center construction ranges from $100 to $140 per square foot. Medical office buildings, with their specialized plumbing, HVAC, and tenant improvement requirements, run $175 to $250 per square foot. Mixed-use downtown development, which often involves structural complexities and higher finish levels, ranges from $150 to $200 per square foot.
El Paso's desert climate offers a construction scheduling advantage. With only approximately 45 rain days per year and minimal snowfall, weather-related construction delays are far less common than in the Southeast, Northeast, or Pacific Northwest. However, extreme summer heat (temperatures regularly exceeding 100 degrees from June through August) can limit outdoor work hours and affect concrete curing times. Experienced El Paso contractors plan around these seasonal factors.
Use our commercial mortgage calculator to estimate monthly payments on your El Paso construction project, or try our DSCR calculator to evaluate whether projected income will support the permanent financing.
Where Is Construction Activity Concentrated in El Paso?
El Paso's construction activity is concentrated in several key corridors, each serving different market segments.
Industrial and logistics construction dominates the East Side and Socorro corridors, where developers are building more than 5 million square feet of new warehouse and distribution space near the ports of entry. Trammell Crow and Barings' Speedway Logistics project (804,283 square feet), Sky Park El Paso Phase 1, and the Sansone Group's planned 3.7 million square foot industrial hub represent the scale of activity in this corridor. These projects are positioned to serve the growing cross-border logistics market.
Infrastructure construction is transforming central El Paso through the 6.1-mile I-10 corridor project and the new El Paso Water headquarters (completion spring 2026). These public investments improve the commercial viability of adjacent properties and create opportunities for private development.
Multifamily construction, while more modest than industrial, includes approximately 400 new units expected in 2025. Most new apartment construction is concentrated in the Northeast (near Fort Bliss) and West Side submarkets where demand fundamentals are strongest.
Downtown and mixed-use development is gaining momentum through the city's downtown revitalization initiatives. The city's offering of 17 properties for adaptive reuse in the Union Plaza district creates specific opportunities for developers willing to navigate the historic preservation and renovation process.
What Does the Construction Loan Process Look Like in El Paso?
Securing a construction loan in El Paso follows a structured process with several critical milestones. Being prepared with the right documentation and understanding the local permitting environment can significantly accelerate your timeline.
Pre-qualification begins with submitting a project overview, preliminary architectural plans, contractor qualifications, and your financial documents. El Paso lenders evaluate your experience as a developer, financial strength, and the basic feasibility of your proposed project. Having a track record of successful projects, even in other markets, strengthens your application. This stage typically takes two to four weeks.
Site analysis and appraisal involve ordering an as-completed appraisal, which estimates what your property will be worth once construction is finished. For El Paso projects, the appraiser considers comparable developments in your target submarket, current absorption rates, and projected rental income or sales values. The lender also reviews El Paso-specific factors including zoning compliance, environmental reports, and geotechnical studies (particularly important in the Chihuahuan Desert where caliche soil conditions can affect foundation design).
Underwriting involves a deep review of your general contractor's qualifications, the detailed construction budget, market analysis, and your personal and business financials. El Paso lenders typically want to see a minimum credit score of 680, at least 25% to 35% equity, and a clear exit strategy through either permanent financing or sale. Pre-leasing or pre-sales agreements significantly strengthen your application, particularly for speculative projects.
After closing, the draw process begins. Your loan funds are disbursed in stages as construction milestones are completed, with each draw requiring a third-party inspection to verify progress.
How Does the Draw Schedule Work for El Paso Construction Projects?
The draw schedule determines when and how you receive construction loan proceeds throughout your project. Understanding this process helps you manage cash flow effectively.
A typical El Paso construction project has five to seven draws, each tied to specific milestones. The first draw funds land acquisition or pre-construction costs (15% of loan). Subsequent draws cover foundation and site work (15%), structural framing (25%), mechanical, electrical, and plumbing rough-in (20%), interior build-out (15%), and final finishes and punch list (10%).
During the draw process, you submit a formal request with supporting documentation including invoices, lien waivers from subcontractors, and progress photos. The lender dispatches a third-party inspector to verify that work matches the draw request. Once approved, funds are typically released within three to five business days.
Retainage is an important consideration. Most El Paso construction lenders hold back 5% to 10% of each draw as a safety net. These retained funds are released after final completion and after the lien-free waiting period expires. Plan your cash flow to account for this holdback.
Interest accrues only on funds that have been disbursed, not on the full loan amount. This interest-only structure during construction preserves cash for project-related expenses. Learn more about how construction financing structures work across different property types.
What Are the Biggest Risks of Construction Projects in El Paso?
Construction lending carries inherent risks that differ from traditional commercial mortgages. Understanding and planning for these risks improves both your project outcomes and your lender relationships.
Cost overruns remain the number one risk in construction. While El Paso's cost environment is more stable and affordable than many markets, unexpected site conditions (particularly caliche and rocky soil in the Chihuahuan Desert), material price fluctuations, and design changes can still impact budgets. Build a contingency of at least 10% to 15% into your project budget.
Timeline delays add interest expense with every passing month. El Paso-specific factors that can cause delays include extreme summer heat limiting outdoor work hours, City of El Paso Building Services permitting timelines, utility connection scheduling (particularly for water and sewer in newer development areas), and specialized labor shortages for certain trades. Work closely with your general contractor to build realistic timelines with appropriate buffers.
Interest rate risk affects construction loans because most use variable rates tied to SOFR. If rates rise during your 12 to 24 month construction period, your interest costs increase with each draw. Some lenders offer rate caps or limited fixed-rate construction options to manage this risk.
Market risk is the possibility that conditions change between when you start building and when you finish. While El Paso's industrial fundamentals remain strong and the nearshoring trend appears durable, short-term fluctuations in trade policy or border operations could affect absorption timelines for new speculative space.
How Do You Choose the Right Construction Lender in El Paso?
Selecting the right lender involves evaluating more than just interest rates. The best construction lender for your El Paso project depends on your experience level, project type, and financing needs.
Local and regional banks like WestStar Bank, International Bank of Commerce, and FirstLight Federal Credit Union understand the El Paso market intimately. These banks can process construction loans faster because they do not need extensive market education, and their local inspection teams can respond quickly to draw requests.
National commercial lenders and debt funds may offer higher leverage or more flexible terms for larger projects, particularly the $10 million-plus industrial developments near the ports of entry. These lenders are active in the El Paso market and familiar with the cross-border dynamics that drive industrial demand.
SBA-preferred lenders are essential if you are pursuing an SBA 504 construction loan for an owner-occupied property. El Paso has an active network of SBA-affiliated lenders and Certified Development Companies.
Private lenders and hard money sources fill gaps where traditional banks cannot lend, such as speculative projects, borrowers with credit challenges, or deals requiring fast closing. Rates are higher (10% to 14%) but the flexibility can be valuable.
Compare at least three to four quotes before committing. Pay attention to not just the interest rate but also origination fees, draw inspection fees, extension options, and any prepayment penalties. Contact our team to get connected with construction lenders who specialize in the El Paso market.
Frequently Asked Questions About Construction Loans in El Paso
What is the minimum down payment for a construction loan in El Paso?
Most El Paso construction lenders require a minimum down payment of 25% to 35% of total project cost for experienced developers. First-time builders typically need 30% to 40% equity. SBA 504 construction loans may allow as little as 10% down for qualifying owner-occupied properties, making them the most accessible option for business owners building their own facilities. El Paso's lower construction costs mean the absolute dollar amount of your equity contribution is significantly less than in higher-cost markets.
How long does it take to close a construction loan in El Paso?
The typical timeline from application to closing for an El Paso construction loan is 60 to 90 days. This includes two to four weeks for pre-qualification, three to six weeks for appraisal and underwriting, and two to three weeks for closing. Complex projects, those requiring environmental review, or deals with first-time developers may take longer. Having your construction plans, contractor agreements, and financial documents prepared before applying can help accelerate the process.
Do I need a licensed general contractor for an El Paso construction loan?
Yes, virtually all El Paso construction lenders require a licensed general contractor. Texas does not have a statewide general contractor license, but the City of El Paso requires contractors to register with Building Services and obtain appropriate permits. Lenders evaluate the contractor's experience, financial stability, bonding capacity, and track record of completing similar projects on time and on budget. Owner-builder arrangements are rarely accepted for commercial construction loans.
How does El Paso's desert climate affect construction loan timelines?
El Paso's desert climate has both advantages and disadvantages for construction. The advantage is minimal rainfall (only 45 days per year), which means far fewer weather delays than most U.S. markets. The disadvantage is extreme summer heat, with temperatures regularly exceeding 100 degrees from June through August, which can limit outdoor work hours and affect material curing. Experienced El Paso contractors plan around these seasonal factors by scheduling outdoor-intensive work for the cooler months (October through April) and interior work during summer. Build a realistic timeline with your contractor that accounts for seasonal conditions.
Can I get a construction loan for a speculative project in El Paso?
Yes, but terms will be more conservative than for pre-leased or build-to-suit projects. Speculative construction loans in El Paso typically require 30% to 40% equity, higher credit scores (700+), significant development experience, and a strong market analysis demonstrating absorption projections. The industrial sector near the ports of entry is the most receptive to speculative financing, as lenders recognize the structural demand from nearshoring. Speculative multifamily construction is more challenging to finance given the limited new supply historically in El Paso.
What happens if my El Paso construction project goes over budget?
Cost overruns on a construction loan must typically be funded by the borrower. If your project exceeds the approved budget, you will need to contribute additional equity. This is why building a 10% to 15% contingency into your original budget is critical. Some lenders allow a loan modification to increase the amount if the property's as-completed value supports additional financing, but this requires new underwriting and is not guaranteed. Maintaining open communication with your lender about budget status at each draw helps manage expectations.