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The San Antonio industrial market’s overall vacancy rate was up only 10 basis points quarter-over-quarter at 6.8% and increased by 80 basis points year-over-year.



Vacancy at 6.9%

The San Antonio industrial market’s overall vacancy rate increased only 10 basis points quarter-over-quarter at 6.9%, and was up by 20 basis points year-over-year. Class A space ended the third quarter at 20.8% vacancy, up from 19.1% this time last year, based on a total inventory of 15.6 million sq. ft. in 94 existing industrial properties. In addition, overall net absorption registered 1.0 million sq. ft., up from 646,000 sq. ft. this time last quarter. There is 3.4 million sq. ft. under construction, with about 40% of that available for lease. Triple net average monthly asking rents recorded $0.55 per sq. ft. in the third quarter, up from this time last quarter at $0.52 and up from last year at $0.53 per sq. ft.


Economic indicators

The Federal Reserve Bank of Dallas reported that San Antonio’s metro unemployment rate ticked down to a still elevated 6.4% in August, lower than the state and national rates of 6.8% and 8.4%, respectively. San Antonio payrolls grew at a nonannualized 2.8% (27,850 jobs) in the three months ending in August, with mixed performance across sectors. Leisure and hospitality experienced the most gains (13.1%, or 13,330 jobs) and was followed by other services (8.0%, or 2,700 jobs) and trade, transportation and utilities (3.4%, or 6,100 jobs). The mining sector declined at the sharpest rate, contracting 2.7% (-250 jobs). While increases over the past four months have generally been strong, they have not been large enough to offset the losses in March and April. So far this year, employment has declined across all sectors, with total jobs down 5.5%.



New supply outpaces demand

The San Antonio industrial market has grown to 128.7 million sq. ft., expanding the metro’s inventory by 15.7%—or 17.5 million sq. ft.—in the last five years. The amount of industrial space delivered to the market during Q3 2020 was 1.3 million sq. ft., compared to the quarter’s 1.0 million sq. ft. of net absorption—a close margin. Net absorption is the measure of total square feet occupied in existing buildings, (indicated as a Move-In) less the total space vacated (indicated as a Move-Out) over a given period. The Q3 2020 net absorption was comprised almost entirely of Warehouse/Distribution space at positive 997,000 sq. ft., with Flex Space tallying positive 52,000 sq. ft., and Manufacturing responsible for negative 23,000 sq. ft.


$30.5 million planned delivery station

A proposed project listed as a 219,000-sq.-ft., single-story warehouse at I-35 and Fischer Road shows likenesses with other facilities owned by Records show an estimated cost of $30.5 million and a start date of mid-November 2020. The scheduled completion date is Q4 2021. The project name is shown as “Delivery Station – DSX5.” Amazon’s delivery facility at 6558 E. Campus Drive is named DSX1, and their 1120 N. Foster facility is named DSX3.


Growth in New Braunfels

New Braunfels was once again ranked as one of the fastest-growing cities in the United States. Data released by the U.S. Census Bureau has New Braunfels as the third fastest-growing city in the country between April 1, 2010, and July 1, 2019. New Braunfels grew over 56% from 2010-2019; and Comal County grew nearly 44% during the same time period. In some instances manufacturing is being transferred back by foreign firms to New Braunfels, including Canadian-based CGT, the leading Tier One automotive supplier for a dozen original equipment manufacturers for interior coverings. Also notable is that the first Wal-Mart distribution center in the state was located here due to the strategic location in Central Texas. Prior to the pandemic, New Braunfels was primed for a record year of commercial investment. With the ongoing developments in combating COVID-19, the community is expected to continue on its course to recovery.


Manufacturing hub in Seguin

Seguin has a 70-year history as home to large manufacturing companies, and has experienced notable growth over the last 10 years. Three of the five largest employers in Seguin are manufacturing companies: Caterpillar Inc., maker of heavy equipment; Continental AG (Motorola), manufacturer of powertrain vehicle components; and CMC Steel Texas, which deals in scrap metal recycling. Instant coffee startup Coffee Tech Industries will build its $56-million headquarters and future coffee manufacturing plant in the Rio Nogales Industrial Park, which is also home to Niagara Bottling’s plant and a CPS Energy gas plant. In addition, it will be the future home to United Alloy Inc. and Continental Structural Plastics Inc. plants. The Sequin Economic Development Corp. has reported that about 30% of the people employed within Sequin’s primary zip code are employed in manufacturing—a notably high percentage in comparison to San Antonio, Bexar County, or New Braunfels. In nearby Guadalupe County, 20% of the workforce is in manufacturing.


Investment sales activity

Real Capital Analytics data reports the third quarter sales volume for San Antonio industrial properties was $89.9 million, compared to third quarter 2019 at $227.5 million. The primary capital composition for buyers in Q3 2020 was made up of 41.8% private investors, and 23.0% institutional. For sellers, the majority was 58.5% private and 15.2% user/other investors. Goodwill Industries of San Antonio Inc. purchased the 124,500-sq.-ft. former Walmart store at 7702 N. I-35. Move in is scheduled for December 2021. Goodwill will be moving out of its current space at 4810 Eisenhauer Rd. The company plans to convert the facility into an operations center and outlet store.


Leasing activity

The volume of square footage signed during the third quarter was at 1.3 million sq. ft.—down from the previous quarter’s 1.8 million sq. ft., although ecommerce and logistics activity continue to be strong in San Antonio. Top transactions during the third quarter included the signing of a deal for 218,280 sq. ft. at 1851 S. Sequin Ave. in New Braunfels; Pallet Logistics inked a deal for 70,200 sq. ft. at 2211 Corner Ridge in the Northeast submarket; and CDS Moving taking 55,025 sq. ft. at 5755 Tri County Parkway in Guadalupe County.


Average asking NNN rent increases

Monthly rental rates for the entire market on average increased as of the third quarter of 2020, up quarter-over-quarter and year-over-year. Yes, the average “asking” rate has increased, with the triple net average monthly rents at $0.55 per sq. ft., but while landlords will continue to ask for higher rental rates, the actual transacting rental rates are decreasing. Landlords are having to get aggressive on rates and concessions in order to stay competitive.

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


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