Quarterly Market Report

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EXECUTIVE SUMMARY

 

Industrial Market

Following a resilient 2016, San Antonio’s industrial market slowed a bit during the first quarter of 2017, in relation to the faster pace of the previous year. The vacancy rate for the metro area rose to 6.7% in Q1 2017, an increase of 70 basis points quarter-over-quarter and 60 basis points year-over-year. In addition, net absorption stood at negative 304,135 sq. ft. as of the quarter’s end. Despite an uptick in these metrics, demand in the market has kept the overall market competitive on a statewide basis, which is an indicator of the requirements for bigger spaces for both real estate owners, investors and occupiers.

San Antonio Economy

Growth in the San Antonio economy continues at a steady pace. The unemployment rate (not seasonally adjusted) ticked up to 4.2% in February, up from 3.9% in January and above 3.6% a year ago. San Antonio remains below the Texas rate of 5.1% and the U.S. rate of 4.9%. Job growth in San Antonio increased by 6,200 jobs during the month in February. Education and Health Services had the largest monthly gain of 3,000 jobs. Government, mainly led by colleges and school districts, posted monthly growth of 1,600 jobs; while Leisure and Hospitality added 1,500 jobs. Trade, Transportation, and Utilities had the largest drop, losing 1,000 jobs.

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MARKET OVERVIEW

 

Net Absorption

San Antonio ended the first quarter of 2017 with negative 304,135 sq. ft. of net absorption. Flex space represented positive 15,895 sq. ft. of that total, Manufacturing space was responsible for positive 29,227 sq. ft., and Warehouse/Distribution space closed the quarter with negative 352,857 sq. ft. San Antonio’s industrial market last saw negative quarterly net absorption in Q3 2014, when it dropped to 183,822 sq. ft. Currently, the South Warehouse/Distribution submarket had the largest amount of negative absorption at 143,394 sq. ft. while the Northwest Flex submarket had the only positive absorption at 25,707 sq. ft. Tenants moving out of large blocks of space in 2017 include XPO Logistics, Inc. leaving 74,400 sq. ft. at 1511 Cornerway Blvd; Interceramic Tile & Stone moving out of 64,500 sq. ft. at 12054 Starcrest Dr; and San Antonio Quality Metals exiting 26,139 sq. ft. at 210 W Peden Aly. Tenants moving into large blocks of space in 2017 include International Paper taking 63,000 sq. ft. at San Antonio Distribution Center - Building 7; Caliber Collision Center leasing 45,500 sq. ft. at Caliber Collision Center; and Arion Perfume & Beauty, Inc. moving into 30,610 sq. ft. at Tri-County Industrial Park - Building 5.

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Availability and Vacancy

San Antonio’s industrial availability rate, which measures the total amount of space being marketed for lease, increased by 10 basis points quarter-over-quarter, from 9.4% to 9.5%. Among the major property types, Warehouse/Distribution ended the quarter at 6.0% availability, Manufacturing closed at 7.7% availability, and Flex space finished at 8.9% availability. Available sublease space in the San Antonio industrial market has not been a significant factor, representing less than 1.0%. In New Braunfels, Comal County Warehouse/Distribution submarket, availability jumped from 9.6% to 15.8% following the delivery of the I-35 Logistics Center at 175 Southwestern Ave., adding almost 400,000 sq. ft. to the market.

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Asking Rent

The industrial market saw overall average asking rates drop $0.06 per sq. ft. quarter-over-quarter to finish at $5.63 per sq. ft. on a triple-net basis at the end of Q1 2017. The average rate for Flex space is at $10.41 per sq. ft., Manufacturing rates averaged $4.27, and Warehouse/Distribution space is at $5.27. Even though rental rates dipped slightly this quarter, the citywide average asking rate since Q3 2014, when the oil downturn hit markets across Texas, has averaged $5.61 per sq. ft. In addition, over 3.2 million sq. ft. of newly delivered space has hit the San Antonio industrial market during the last 15 months, with rental rates up $0.18 per sq. ft. year-over-year.

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Construction & Deliveries

There is currently about 838,000 sq. ft. under construction in the San Antonio industrial market, with a large percentage of that space available for lease. The largest projects underway at the end of first quarter 2017 were Green Mountain Business Park #7, a 100,000-sq.-ft. building; and Alamo Ridge Business Park 4, a 96,930-sq.-ft. facility. Some of the notable 2017 deliveries include I-35 Logistics Center, a 397,600-sq.-ft. facility; and 1287 Industrial Dr., a 15,618-sq.-ft. building that delivered in first quarter 2017 and is now 75% occupied, both in Comal County. One of the most sought-after submarkets is the Northeast, in part because of its proximity to the I-35 corridor and convenient access to other major interstates. Two of the industrial market’s largest deals were completed in that submarket at the end of 2016, including Alamo Brewery’s 54,400-sq.-ft. deal and Alamo Brokerage’s 46,500-sq.-ft. lease at the Cornerstone Business Park.

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Leasing Activity

Overall leasing activity was down slightly quarter-over-quarter, from 814,561 sq. ft. to 808,029 sq. ft., while year-over-year was down almost 50%, from 1.5 million sq. ft. The average sq. ft. leased per quarter during the last 10 years is approximately 1.0 million sq. ft. The largest lease signings occurring in 2017 included the 147,840-sq.-ft. deal inked by Southern Warehousing in the South submarket; the 30,610-sq.-ft. lease signed by Arion Perfume & Beauty, Inc. at Tri-County Industrial Park - Building 5 in the Comal County market; and 11,800 sq. ft. taken by Crafco Inc. at 2103 Danbury St in the North Central market.

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Office Submarket Spotlight

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Sublease Digest

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Monthly Snapshots

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Market Insight

Market Insight

 

Monthly Snapshots (Historical)

 

Houston Office June 2017

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Data InSight

Data InSight

 

Quarterly Reports (Historical)

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Q1 2017 Office Market Report

Q1 2017 Industrial Market Report

Q4 2016 Office Market Report

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SAN ANTONIO

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​Q1 2017 Industrial Market Report

AUSTIN

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Q1 2017 Industrial Market Report

 

SoundBytes

May 22, 2017

May 11, 2017

April 20, 2017

March 28, 2017

 

Resources

I-35 Corridor Activity Map

The New #CREcosystem Refresh - featuring contributions from Larry Koestler, VP of Marketing