HEALTHY MARKET MOVEMENT
The San Antonio industrial market saw another quarter of robust market activity with 188,801 sq. ft. absorbed, marking an eight-year streak of positive quarterly net absorption. The Northeast submarket had the most absorption in Q3 2019 with 227,393 sq. ft. The South submarket took the biggest hit this quarter with negative net absorption of 102,485 sq. ft. This is due to Twigland Fashions moving out of 4958 Stout Drive. Several large tenants such as San Antonio Portable Storage, Convermex USA, and International Paper signed deals and are scheduled to move in before the end of the year. Combined, the three tenants will absorb 280,000 sq. ft. in the Northeast submarket by the end of 2019.
ASKING RATES LEVEL OUT
Market-wide industrial asking rates dipped slightly, down $0.39 per sq. ft. quarter-over-quarter, but have remained steady in the last 12 months and are up $0.13 per sq. ft. year-over-year. Rates in the Northeast submarket were flat quarter-over-quarter, while rates in the South rose by $0.21 per sq. ft.
VACANCY RISES, BUT SCHEDULED TO FALL
Deliveries ramped up this quarter with over 1 million sq. ft. of completed construction. Due to the high volume of vacant product hitting the market, the market-wide vacancy rate rose 180 basis points (bps) from 9.3% in Q2 2019 to 11.1%. Class A product saw the biggest jump in vacancy, an increase of 480 bps. Of the 1 million sq. ft. added to the market in Q3 2019, 98% of it was Class A product. Much of the delivered product is pre-leased with occupancies slated for Q4 2019 and early 2020. CBRE Research expects the vacancy rate to dwindle down as several large tenants take occupancy in future quarters.
NEW DEVELOPMENTS HEATING UP
The construction pipeline tightened with 7 large-scale projects delivering this quarter, leaving 12 building underway and several million sq. ft. of both speculative and build-to-suit projects that are in the proposal stages. Heavy leasing activity taking place in recent developments is driving the demand for more Class A industrial space, specifically in the Northeast and South submarkets.