San Antonio Industrial Market Net Absorption Remains Positive, Vacancy Rates Continue to Rise
EXECUTIVE SUMMARY
San Antonio’s industrial market posted another positive quarter of net absorption with 219,296 SF in Q3 2025. New construction deliveries of 1.5 million square feet showed developer confidence in the market, but contributed to an increase in the vacancy rate from 10.7% to 11.5%. A significant portion of vacancies continue to be carried by large warehouse/distribution buildings (450,000 SF+) in the Northeast and South submarkets. Flex properties contributed the most to positive absorption, driven by Balcones Heights Business Park and Brooks Business Park. Construction activity slowed by 7.7% over the quarter and was down 44.1% over the year, showing an opportunity for developers looking to position themselves for future vacancy rate compression. Leasing activity decreased, dropping 44.4% over the quarter, but remained over 1,000,000 SF.
SUPPLY & DEMAND
KEY MARKET INDICATORS
MARKET OVERVIEW
SAN ANTONIO ECONOMIC UPDATE
According to the U.S. Bureau of Labor Statistics, the San Antonio unemployment rate increased from 3.7% in May 2025 to 4.1% in August 2025.The unemployment rate in Texas remained at 4.1%. The San Antonio Business-Cycle Index, a gauge of economic conditions in the metro area, increased an annualized 8.1% in August. San Antonio payrolls rose in August, increasing at an annualized rate of 6.6%. From May through August, payrolls grew 4.1% (12,100 jobs), driven by gains in education and health services, which added 8,700 jobs, and government, which added 8,100 jobs. The mining sector lost 6,400 jobs.
NEW DELIVERIES PUSH VACANCY RATES UP
The overall vacancy rate in San Antonio’s industrial market is 11.5%, up from 10.7% in the previous quarter. Flex, Manufacturing, and Warehouse/Distribution space have vacancy rates of 7.8%, 5.7%, and 13.3%, respectively. New construction deliveries of 1,500,178 SF for the quarter contributed to the rise in vacancy rate as the market works through remaining 2023 vintage product focused in larger, deeper buildings. With 49% of the construction pipeline being pre-leased, the total vacancy rate could increase slightly over the short term.
NET ABSORPTION REMAINS POSITIVE IN Q3 2025
Net absorption—move-ins minus move-outs—remained positive in Q3 2025, recording 219,296 sq. ft., down from the 331,635 sq. ft. of positive net absorption recorded in Q2 2025. Flex properties contributed the highest amount of positive absorption in Q3 2025, posting 441,396 sq. ft., while manufacturing and warehouse/distribution were negative at -83,152 sq. ft. and -138,948 sq. ft., respectively. Recent notable move-ins include Americold moving into 400,000 sq. ft. in 5711 FM 78 in the Northeast submarket. Additionally, Nippon Express has moved into 211,000 sq. ft. in Galleria Industrial Park in the Northeast submarket marking a turning point for the large vacant buildings in the submarket.
LEASING ACTIVTY SLOWS
Quarterly leasing velocity—comprised of new leases and renewals—stood at 1.0 million sq. ft., down 44.4% from 1.8 million sq. ft. in Q2 2025. The Warehouse/Distribution sector accounted for most of the leasing activity (82%), with more subdued activity in Flex and Manufacturing properties. Recently signed leases include Major USA, which signed a 125,200 sq. ft. lease at Enterprise Industrial Park Building IV; LGH, which signed a 44,000 sq. ft. lease at I-35 Logistics Center; and Alpha Insulation, which signed a 22,000 sq. ft. lease at Building 1 of Interchange at Live Oak.
AVERAGE ASKING RENTAL RATES INCREASE
San Antonio’s industrial market average monthly rental rate (NNN) increased 6.8% over the quarter from a record high $8.54 per sq. ft. to a record high of $9.12 per sq. ft. The average monthly rate for Flex Space was $13.83 per square foot, while the rates for Manufacturing and Warehouse/ Distribution Space were $7.23 and $8.44 per square foot, respectively.
DELIVERIES INCREASE WHILE THE CONSTRUCTION PIPELINE DECREASES
Construction deliveries increased by 10.1% in Q3 2025, with 1,500,178 sq. ft. completed. In contrast, the under construction pipeline decreased by 7.7% to 1.5 million sq. ft. in Q3 2025, down from 1.4 million sq. ft. in Q2 2025. Some of the larger projects under construction in Q3 2025 include the 500,000 sq. ft. Toyota Rear Axle Plant located in the South submarket at 16168 Applewhite Rd. and a 422,000 sq. ft. building in the Eisenhauer Logistics Park.
INVESTMENT SALES TRENDS
CoStar Capital Market Analytics reports a cumulative 12-month sales volume of $198 million for Q3 2025. Over the past year, 143 deals were completed in San Antonio’s industrial market with an average transaction price of $107 and an average cap rate of 7.6%. Recent notable sales include Building 2 (307,520 sq. ft.) in the Selma Industrial Park, purchased by EQT Real Estate from Robinson Weeks Partners for an undisclosed amount. Additionally, Trevor Wood purchased a 307,000 sq. ft. building located in the Doerr Lane Logistics Center from Ackerman & Co. for a reported $45.7 million or $149 per sq. ft.
For More Information, Contact:
Steve Triolet
SVP of Research and Market Forecasting
tel 214 223 4008
[email protected]
