REOC San Antonio
Commercial Real Estate Since 1974   
Kim_Gatley
Kim Gatley
S
enior Vice President & Director of Research at REOC San Antonio

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REOC San Antonio releases 3Q industrial market update

Source: REOC San Antono

The San Antonio industrial market continues to experience significant improvement.  New leases and expansions generated 112,605 square feet of positive net absorption which demonstrated a sustained demand for industrial space in the Alamo City and lowered the citywide vacancy rate to 10.6%.  The delivery of the newly completed Building 8 (130,619 sf) at the Green Mountain Business Park situated in the Northeast sector provided the biggest boost to third quarter absorption since it came online completed pre-leased by American Tire Distributors – a new tenant to the local market.  The third quarter gain pushed the year-to-date total to 948,142 square feet – more than the total of the past three years combined. 

In addition to large tenant leases, recent activity also revealed other important components driving the local market including continued demand from third-party logistics companies which have become a much larger share of the local tenant mix.  With the oil boom and recovering economy, requests from third-party logistics companies have spiked in anticipation of long-term demand. San Antonioindustrial properties also continue to benefit from the spillover of Eagle Ford Shale activity but just as significant is the return of smaller, local businesses which is so critical for widespread, sustainable recovery. 

While new supply remains constrained, the lack of new deliveries has funneled demand to existing facilities which has reduced vacancies and, in turn, supported a slight increase in rental rates.  As the rental rates begin to rise, concessions and incentives have become less available and the deep-discounts that were being offered have nearly been eliminated.  Shrinking availability, especially within the subset of Class A warehouse market, has sparked rumblings of speculative development but financing remains a challenge.  There are currently no speculative projects under construction.

Click to read related article: Small-tenant leases bode well for San Antoio’s industrial real-estate sector (San Antonio Business Journal, 11-2-12).

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