Subscribe to Our Research Content

  • This field is for validation purposes and should be left unchanged.


Download PDF


Industrial indicators strengthening
San Antonio’s industrial market tightened during Q3, with the overall vacancy rate falling to 5.7%, a drop of 70 basis points quarter-over-quarter, and a decrease of 20 basis points year over year. In addition, net absorption increased to positive 964,789 sq. ft. as of the quarter’s end, compared to 134,488 sq. ft. at the end of the second quarter. Demand in the market has pushed Warehouse/Distribution rents to new highs, with the average asking rate per sq. ft. at $5.45; Flex space at $9.05 per sq. ft. is down from its all-time high of $10.40 during Q1 2017; while Manufacturing space has remained near its five-year average of $4.15 per sq. ft., closing the quarter at $4.20. Over 1 million sq. ft. has delivered in 2017 with 1.2 million sq. ft. currently under construction. Overall, there is about 945,000 sq. ft. of available space in the construction pipeline with all listed as Warehouse/Distribution except 100,000 sq. ft. of Flex space in the North Central submarket. The amount of future available space may pave the way to more challenging times in the San Antonio industrial sector as we near the end of 2017.

Acceleration in the local economy in August
The economy fast-tracked in August, as the San Antonio Business-Cycle Index increased at its fastest pace since 2016, while the area unemployment rate remained the same and job growth surged. Jobs increased at a strong 3.6% annualized rate over the three months through August. Mining and financial services employment led overall growth among the major industries, followed closely by construction. As for unemployment, the non-seasonally adjusted rate for the San Antonio metro remained at a low 3.7%, well below the seasonally adjusted national rate of 4.4% and state rate of 4.2%.




Net absorption surged in third quarter
At the end of the third quarter, net demand increased to 965,000 sq. ft., a level not seen since 2016. The surge was a significant increase from 134,000 sq. ft. last quarter, and pulling far out of the red zone from the beginning of the year. The amount of square feet delivered to the market in Q3 2017 decreased slightly at 137,000 sq. ft., resulting in squeezing an already tight market and lowering vacancy rates. San Antonio’s industrial vacancy rate, measuring all space not currently occupied by a tenant, dropped to 5.7%, down from 6.4% quarter-over-quarter. Among the major property types, Warehouse/Distribution ended the quarter at 5.2% vacancy, Manufacturing closed at 5.3% of unoccupied space, and Flex space finished at 9.4% vacancy.

The major move-ins contributing to positive net absorption in Q3 2017 include 93,377 sq. ft. of space occupied at Cornerstone Industrial Park at 8562 NE I-410 Loop, in the Northeast submarket; 80,265 sq. ft. taken at Enterprise Industrial Park at 17745 Lookout Road, in the Comal County submarket; and 71,315 sq. ft. of space absorbed at 309 Clarence Tinker Dr., in the South submarket. The major move-outs during 2017 involve ProBuild moving out of 176,570 sq. ft. at 9901 Doerr Lane; XPO Logistics, Inc. vacating 74,400 sq. ft. at 1511 Cornerway Blvd; and Buell’s Inc. leaving 65,106 sq. ft. at 816 N. Main St.



1.2 million sq. ft. of construction underway
There is currently 1.2 million sq. ft. under construction in the San Antonio industrial market, with a large amount, or 78% of that space available for lease. The largest projects underway at the end of the third quarter were Enterprise Industrial Park – Bldg. III, a 359,251-sq.-ft. building, delivering in the fourth quarter 2017; and Gateway 10 Business Park – Building 1, a 179,655-sq.-ft. facility with the expected delivery in June 2018. Gateway 10 broke ground on the 108-acre mixed-use business park along I-10 and Foster Road, combining 75 acres of industrial/warehouse space with 33 acres of retail/commercial space. Building 1 is one of seven proposed warehouses to be built in the 1.3-million-sq.-ft. business park. It has been said that all of the buildings will be over 100,000 sq. ft., with the two largest sites at 225,000 sq. ft. and 290,000 sq. ft. Another proposed project said to be in the works is the renovation of Rittman Trade Center, a multi-warehouse park at 4728 Goldfield Drive in the Northeast submarket.  Keep your eyes open, the transformation to the park is scheduled to be completed in the first quarter of 2018.

Some of the notable deliveries in 2017 include I-35 Logistics Center, a 397,000-sq.-ft. industrial building in the Comal County submarket; and Tri County Business Park at 9850 Doerr Lane, a 214,536-sq.-ft. complex that is also in the Comal County submarket, 100% leased. Year-to-date 2017, 14 buildings totaling 1,045,973 sq. ft. were completed in the San Antonio market area. Just over 400,000 sq. ft., or 62% of those completions took place in the Comal County submarket, which includes the cities of Schertz and New Braunfels.



Bright spot for investment sales and leasing activity
Real Capital Analytics data reports that moving into the fourth quarter, year-to-date industrial sales volume in the San Antonio area is at $425.5 million, resulting in a year-over-year change of 72%. The buyer composition is made up of 38% cross-border, 36% private, 12% public listed/REITs, 7% institutional, and 7% user/other. Another positive sign for the San Antonio industrial market is the Stonemont Financial acquisition of Weatherford-Eagle Ford Headquarters in San Antonio, an eight-building industrial/flex property totaling 184,589 sq. ft. from Oak Street RE Capital. The property was 100% occupied at the time of sale, including the flex/office buildout of 50,000 sq. ft.

Leasing activity slowed during the third quarter with a total of 745,000 sq. ft. in the San Antonio industrial market. This is in comparison to 1.2 million sq. ft. leased throughout Q2 2017. Warehouse/Distribution space led the way at 587,000 sq. ft., followed by Flex space fulfilling 131,000 sq. ft., and Manufacturing space realizing 23,000 sq. ft. These amounts are down significantly from both this time last quarter and last year. The largest lease signings occurring in 2017 included the 214,536-sq.-ft. lease by Ace Mart Restaurant Supply at 9850 Doerr Lane in the Comal County submarket; the 187,500-sq.-ft. deal inked by Visionworks at Tri County 35 Business Park II – Building B also in the Comal County submarket; and the 147,840-sq.-ft. lease completed by Southern Warehousing at Interchange East Distribution Center-Building 1 in the South submarket.


Asking rates up from last quarter and last year
The industrial market saw overall NNN average asking rates rise $0.07 per sq. ft. quarter-over-quarter to finish at $5.71 per sq. ft. at the end of Q2 2017. Rates for industrial real estate throughout San Antonio show that the North Central submarket has the highest prices for industrial space at $8.44. The average rate for Flex space is currently highest in the Northwest submarket, at $11.70 per sq. ft.; Manufacturing rates peak at $4.81 in the South submarket; and Warehouse/Distribution space is at its high point at $7.29 in the CBD submarket. In addition, the average price per sq. ft. for investment sales in the prior 12 months through Q3 2017 was $59, versus Q3 2017 settling at $111, an increase of 83.9%.

Leta Wauson
Director of Research
tel 713 275 9618

We Want to Hear From You

  • This field is for validation purposes and should be left unchanged.