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 releases 4Q 2014 Industrial Market Report

Source REOC San Antono/Xceligent

Source REOC San Antono/Xceligent

The San Antonio industrial market started 2014 with a very tight citywide vacancy rate of 6.7% leaving little room to accommodate new and growing companies.  “Despite seemingly favorable market conditions, developers and lenders have been largely reluctant to launch speculative projects,” says Kim Gatley, Senior Vice President and Director of Research for REOC San Antonio, a locally-based, full-service real estate company.  The tide, however, may be turning.

Three new buildings totalling more than 377,000 square feet of much needed industrial lease space were delivered to the Northeast sector in the final quarter of the year.

According to the survey of more than 33.5 million square feet of industrial lease space, the San Antonio industrial market closed 2014 with a vacancy rate of 7.2% – only slightly higher than where it began the year twelve months earlier despite the addition of new supply.  “Current availabilities are rather limited for companies looking to relocate or expand here in San Antonio,” observes John Greg Turcotte, CCIM, Senior Vice President and Partner, REOC San Antonio., “but there are more projects moving through the development pipeline.”

“Clearly, demand for industrial space remains strong even if gross leasing activity seems a little flat due to the lack of available space,” says Turcotte.  Activity in the fourth quarter did flatten which resulted in 36,237 square feet of negative net absorption. Results for the year, however, remained positive with 505,802 square feet of net gain in occupied space.

While the citywide vacancy rate stands at 7.2%, Distribution Warehouse properties boast an even tighter vacancy rate of 5.8%.

In the wake of tightening supply, rental rates for area industrial space continue to climb.  The citywide average quoted rental rate remained stable over the quarter at $7.76 per square foot per year on a triple net basis, which is up $0.18 or 2.4% compared to a year ago.

San Antonio continues to see job growth which is a major driver for commercial real estate. Over the past twelve months, the San Antonio metro area added nearly 28,500 jobs for an annual growth rate of 3.1%, according to the Texas Workforce Commission.  “The drop in oil prices has already slowed operations in the Eagle Ford Shale which is rippling through the industrial market but the forecast, at this point, is a slowdown not a crash,” says Turcotte.  Due to the area’s diverse economy, the Federal Reserve Bank of Dallas projects that despite the uncertainty caused by falling oil prices, San Antonio job growth will likely hit 3% again in 2015, which is better than the 2 – 2.5% growth rate forecasted for the state.

Click to download REOC San Antonio’s complete 4Q 2014 Industrial Market Report

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