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San Antonio Industrial Commercial Real Estate Market Data and Economic Information - Eisenhauer Point Business Park

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The record-breaking levels of new construction have been pushing the vacancy rate up slightly, ending Q2 2019 at 6.8%, up 70 basis points quarter-over-quarter and representing an increase of 120 basis points year-over-year.


EXECUTIVE SUMMARY

Industrial market vacancy inches upward

The record-breaking levels of new construction have been pushing the vacancy rate up slightly, ending Q2 2019 at 6.8%, up 70 basis points quarter-over-quarter and representing an increase of 120 basis points year-over-year. There has been 1.7 million sq. ft. of space delivered to the market in 2019—about 40% of the total is available for lease. The vacancy rate for Class A properties is at 14.7%, up from 12.2% this time last year. Net absorption is at 112,000 sq. ft. for Q2, comprised of positive 53,000 sq. ft. of Flex space, negative 116,000 sq. ft. of Manufacturing space, and positive 174,000 sq. ft. of Warehouse/Distribution space. Overall net absorption has remained positive for 19 consecutive quarters—Q4 2014—in the San Antonio metro. The overall monthly average asking triple-net rent has steadily grown to its current rate of $0.50 per sq. ft., up from $0.48 a year ago—a 4.1% increase.

Economic indicators

The San Antonio economy expanded moderately in May. Job growth was mixed, with manufacturing expanding at a healthy pace adding 600 net jobs. Professional and business services led growth with an expansion of 11.4% annualized, or 3,900 net jobs. Financial activities also expanded at a healthy pace, adding 800 net jobs. Two areas of softness were leisure and hospitality, which contracted 3.2%, approximately 4,800 net jobs, and construction, dropping 1,100 jobs. The unemployment rate fell for the fourth consecutive month, to 2.8% in May. This is notably lower than the state’s 3.5% and nation’s 3.6% rates. San Antonio was ranked the No. 2 fastest-growing city in the nation based on the U.S. Census Bureau population estimates from 2017-2018 released in May. San Antonio saw a population increase of 20,824 from July 1, 2017, to July 1, 2018, bringing the total population to 1.53 million residents. The last census survey put San Antonio at the No. 1 spot among the fastest-growing cities.

San Antonio Industrial Commercial Real Estate Market Data and Economic Information - Supply and Demand graph

San Antonio Industrial Commercial Real Estate Market Data and Economic Information - Market Indicators table


MARKET OVERVIEW

New supply continues to outpace demand

The San Antonio industrial market has delivered 7 million sq. ft. in the last five years which has expanded the metro’s inventory by 9.7%. During the last five quarters, supply has equaled or outpaced demand, with Q2 2019 resulting in the largest amount of sq. ft. being delivered to the market compared to being absorbed. Positive influences on overall net absorption include major move-ins during the second quarter involving 183,876 sq. ft. of space taken off the market at 4829 Eisenhauer Rd—Eisenhauer Point Business Park 8 in the Northeast submarket; 147,000 sq. ft. of space occupied at 801 S San Fernando St. in the Northwest submarket; and 96,975 sq. ft. of space at 17750 Lookout Rd—Tri-County Crossing 1. Negative effects on overall net absorption involve 198,000 sq. ft. added back to the market at 10120 Fischer Rd—Freeport Business Centre in the South submarket, and 92,000 sq. ft. vacated at 702 San Fernando St. in the Northwest submarket. Year-to-date, across the San Antonio metro, Warehouse/Distribution space equaled 707,000 sq. ft. of positive net absorption, Flex space was responsible for negative 15,000 sq. ft., and negative 173,000 sq. ft. of Manufacturing space was reported.

San Antonio Industrial Commercial Real Estate Market Data and Economic Information - Net Absorption graph

Northeast San Antonio summer groundbreakings

Corner Ridge Crossing, the four-building, 578,800-sq.-ft. speculative industrial park is being developed by Hines, its first industrial project in San Antonio. Construction is anticipated to begin in the third quarter of 2019 and should be completed by the second quarter of 2020. Corner Ridge Crossing will be situated on 45 acres in Cornerstone Industrial Park connected by Corner Ridge and Ackerman Road, near Loop 410 and Interstate 10. In addition, Ridgeview 35, the four-building, 369,000-sq.-ft. industrial park is being developed by EastGroup Properties will be across from Brooke Army Medical Center between I-35 and Loop 410 along Binz-Engleman Rd. Construction should begin Q3 2019 with Phase one of the project consisting of two buildings totaling 226,000 sq. ft. Building one will be a 136,700-sq.-ft. front-load warehouse distribution building, and building two will be a 89,300-sq.-ft. rear-load light distribution building. Completion is scheduled for Q2 2020. San Antonio’s connectivity to Houston, Dallas, Austin and the Mexican border—all in under four hours—further indicate signs of San Antonio’s emerging industrial market. 

San Antonio Industrial Commercial Real Estate Market Data and Economic Information - Vacancy graph

Refrigeration/Cold Storage property changes hands

Real Capital Analytics data reports the second quarter sales volume was $37.7 million compared to second quarter 2018 at $76.2 million, resulting in a year-over-year quarterly volume change of -50.6%. The primary capital composition for buyers in Q2 2019 was made up of 51.9% institutional investors, and 43.4% private. For sellers, the majority was 39.3% private investors, and 25.9% cross-border (a transaction is defined as cross-border if the buyer or major capital partner is not headquartered in the same country where the property is located). In Q2 2019, Provender Partners purchased the 285,476-sq. ft. property at 5505 Kaepa Court in Rittiman East Industrial Park in the Northeast submarket from beverage distributor Ben E. Keith Co. The industrial refrigeration/cold storage facility sits on a 20-acre site, which is served by Union Pacific Railroad.

San Antonio Industrial Commercial Real Estate Market Data and Economic Information - Construction graph

Leasing activity at 1.5 million sq. ft.

Leasing activity picked up in the second quarter of 2019 at 1.5 million sq. ft. compared to Q1 2019 at 991,000 sq. ft. Recent activity includes Mygrant Glass Co. opening its first warehouse in San Antonio, taking 57,348 sq. ft. of the newly built 114,700-sq.-ft. Eisenhauer Point Business Park, Building 7, at 4825 Eisenhauer Road. Mygrant Glass runs 76 additional warehouses throughout 30 states, including four in Texas. The planned move-in date is September 2019. Pacific Seafood will be moving into approximately 50,050 sq. ft. of space at 3003 NE Loop 410–Building B in Interchange North. The company bought the warehouse property in September 2018 and is expected to be relocated by the end of 2019. Pacific Seafood is currently located in an 8,000-sq.-ft. distribution facility at 3321 Belgium Lane which it owns. Pacific Seafood operates 33 additional distribution facilities throughout six states, including two in Texas. Both of these tenants’ new locations are in the Northeast submarket.

San Antonio Industrial Commercial Real Estate Market Data and Economic Information - Deliveries graph

Increasing asking NNN rates

Monthly rental rates for the entire market on average are at $0.50 per sq. ft., as of the second quarter of 2019, down slightly from $0.51 from the previous quarter, with an increase from $0.48 per sq. ft. at this time last year. The monthly average rate for Flex space is currently at $0.91 per sq. ft.; Manufacturing rates are at $0.39; and Warehouse/Distribution space sits at $0.46. The Northwest and North Central submarkets currently have the highest monthly overall average rates at $0.69 per sq. ft., followed by Guadalupe Co. submarket at $0.55. As new projects with high quality space are delivered to the market, coupled with the rising costs to developers, rental rates could continue to increase in the future.

San Antonio Industrial Commercial Real Estate Market Data and Economic Information - Asking Rents graph

San Antonio Industrial Commercial Real Estate Market Data and Economic Information - Sales Volume


Leta Wauson
Director of Research
[email protected]
tel 713 275 9618

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