REOC San Antonio
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Kim_Gatley
Kim Gatley
S
enior Vice President & Director of Research at REOC San Antonio

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Industrial market sees unexpected bounce in third quarter

3Q09_SAIndSnap_BlogThe competitive industrial market, which recorded negative absorption through the first half of the year in response to the economic slowdown, experienced an unexpected bounce in the third quarter. Gross leasing activity generated 240,068 square feet of positive net absorption, primarily within Northeast distribution warehouse facilities. 

Building 7 at Eisenhauer 35, for example, leased 44,000 square feet to LVLA Transport. Inspection Ready Recyclers inked a lease for 29,250 square feet at City Park East Distribution Center, Epower Recycling took down 19,485 square feet at Rittiman Distribution Center and Swift-Train purchased Verde Enterprise Business Park 1 (88,000 sf) with plans to fill the existing vacancy of 72,000 square feet. Despite the gains in the third quarter, typical warehouse activity remains fairly flat but there is the potential for new activity with the coming of Caterpillar in Seguin and the expanded production at the Toyota plant on the city’s southside.

At the close of the third quarter, the citywide vacancy rate improved to 13.8% compared to 15.2% recorded last quarter. In addition to new leases and expansions, vacancy improved when two functionally obsolete vacant warehouses at Port San Antonio were taken off the market and removed from statistics. Despite the positive turn in the third quarter, citywide vacancy is still up compared to 12.2% recorded last year at this time. With speculative development at an absolute standstill, occupancy is expected to tighten over the next year as the overall economy shows signs of improvement. The average quoted triple net rental rate remained relatively stable at $5.57 per square foot per year – up one cent from last quarter but down four cents compared to a year ago – an annual decline of less than one percent.

See also Industrial real-estate market picks up speed in the third quarter (San Antonio Business Journal, October 30, 2009).

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