Alamo City Industrial Market’s Strong First Quarter

SAN ANTONIO (REOC San Antonio) – The local industrial market’s 2014 momentum carried over into the first quarter of this year, according to the REOC San Antonio’s survey of more than 34.3 million sf of industrial lease space. New leases and expansions inked in the first three months of the year translated into 376,707 sf of positive net absorption.

"Thankfully, the slowdown in Eagle Ford Shale activity south of San Antonio has not had a significant impact, to date, on leasing velocity or demand for industrial space in the metro area," said REOC San Antonio Senior Vice President John Greg Turcotte. He said impact will be felt in the fourth quarter if oil prices do not recover past $60/barrel by the third quarter.

The citywide vacancy rate ticked up slightly to 8.2 percent compared with 7.2 percent last quarter and 6.7 percent recorded in the same quarter a year ago. In direct correlation, the citywide average asking rental rate took a $0.12 step backward compared with last quarter to $7.64 per sf per year on a triple net basis. Still, the average rent is up $0.06 compared with a year ago.

Distribution warehouse properties closed the first quarter with a 7.3 percent vacancy rate. The service center/flex market closed the quarter with a vacancy rate of 11.6 percent, unchanged from last quarter and slightly improved compared with 12.5 percent recorded in the same quarter a year ago.

The cost of renting distribution warehouse space currently stands at an average of $5.38, marking a modest 1.9 percent increase compared with average rents recorded a year ago. The average cost of renting service center/flex space increased $0.09 compared with last year at this time to reach $9.35, marking an annual increase of roughly 1 percent.

Nearly 600,000 sf of industrial space is currently under construction led by distribution warehouse projects in the northeast sector.