HOUSTON | AUSTIN | SAN ANTONIO 3.0% 3.8% 4.5% 5.3% 6.0% 6.8% 7.5% 8.3% 9.0% -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4 2016 Q4 2017 Q4 2018 Millions (SF) Net Absorption Completions Vacancy Supply & Demand www.naipartners.com/sanantonio EXECUTIVE SUMMARY Vacancy tightens as rents maintain all-time high San Antonio’s overall industrial vacancy rate dropped to 5.7% in Q4 2018, a decrease of 40 basis points quarter-over-quarter, and unchanged year-over-year. Net absorption soared, registering 1.1 million sq. ft. for the quarter—four times the amount of net absorption in the third quarter, and over 12 times the amount year-over-year, a level not reached since Q3 2016. New supply delivered to the market rose to 684,000 sq. ft., an increase of 85% quarter-over-quarter, bringing the total in 2018 to 1.4 million sq. ft. There is an additional 4.1 million sq. ft. under construction, with 44% available for lease. Triple net average monthly asking rents were unchanged during Q2, Q3 and Q4, to end 2018 at a monthly rate of $0.51 per sq. ft.—a continued all-time high. Economic indicators Growth in the San Antonio economy was moderate in November. The San Antonio unemployment rate was unchanged at 3.2%, notably lower than the Texas and U.S. rates of 3.7%. Jobs in San Antonio grew 2.7% during the three months ending in November, with the mining continuing to add jobs at a strong rate, increasing by 7.1% in the past three months. The manufacturing and leisure and hospitality industries also experienced substantial job increases, adding approximately 900 and 3,150 jobs, respectively. Employment growth in construction, information and other services sectors were reduced during this period. The median home price in San Antonio was $227,342 in November, an increase of 2.4% year over year. This is slightly higher than Texas’ 1.8% increase. SAN ANTONIO INDUSTRIAL | Q4 2018 Quarterly Market Report JANUARY 2019 Market Indicators Current Q4 2018 Prior Quarter Q3 2018 Year Ago Q4 2017 Vacant Direct 5.6% 5.9% 5.5% Vacant Total 5.7% 6.1% 5.7% Available Direct 9.6% 10.0% 7.7% Available Total 9.9% 10.4% 8.3% Net Absorption (SF) 1,102,116 280,079 89,887 Leasing Activity (SF) 2,350,895 1,154,793 826,952 Construction (SF) 4,117,797 4,671,233 1,928,226 Deliveries (SF) 683,860 368,792 78,216 Avg Asking Rent (NNN) $0.51 $0.51 $0.49 Inventory (SF) 115,046,604 114,362,744 113,612,827
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HOUSTON | AUSTIN | SAN ANTONIO
3.0%
3.8%
4.5%
5.3%
6.0%
6.8%
7.5%
8.3%
9.0%
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Q42008
Q42009
Q42010
Q42011
Q42012
Q42013
Q42014
Q42015
Q42016
Q42017
Q42018
Milli
ons
(SF)
Net Absorption Completions Vacancy
Supply & Demand
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EXECUTIVE SUMMARYVacancy tightens as rents maintain all-time high
San Antonio’s overall industrial vacancy rate dropped to 5.7% in Q4 2018, a decrease of 40 basis points quarter-over-quarter, and unchanged year-over-year. Net absorption soared, registering 1.1 million sq. ft. for the quarter—four times the amount of net absorption in the third quarter, and over 12 times the amount year-over-year, a level not reached since Q3 2016. New supply delivered to the market rose to 684,000 sq. ft., an increase of 85% quarter-over-quarter, bringing the total in 2018 to 1.4 million sq. ft. There is an additional 4.1 million sq. ft. under construction, with 44% available for lease. Triple net average monthly asking rents were unchanged during Q2, Q3 and Q4, to end 2018 at a monthly rate of $0.51 per sq. ft.—a continued all-time high.
Economic indicators
Growth in the San Antonio economy was moderate in November. The San Antonio unemployment rate was unchanged at 3.2%, notably lower than the Texas and U.S. rates of 3.7%. Jobs in San Antonio grew 2.7% during the three months ending in November, with the mining continuing to add jobs at a strong rate, increasing by 7.1% in the past three months. The manufacturing and leisure and hospitality industries also experienced substantial job increases, adding approximately 900 and 3,150 jobs, respectively. Employment growth in construction, information and other services sectors were reduced during this period. The median home price in San Antonio was $227,342 in November, an increase of 2.4% year over year. This is slightly higher than Texas’ 1.8% increase.
San Antonio’s industrial vacancy rate, measuring all space not currently occupied by a tenant, stood at 5.7%, down from 6.1% in the third quarter, and unchanged year-over-year. Among the major property types, Warehouse/Distribution ended the quarter at 5.9% vacancy, Manufacturing closed at 3.4% of unoccupied space, and Flex space registered at 9.3%. Vacancy in the San Antonio industrial market has averaged 5.6% during the last three years (Q4 2015). Consequently, with the rate at such a low level, small fluctuations up and down are not particularly significant. Supply shortages continue in the industrial market, while awaiting the completion of 4.1 million sq. ft. of industrial space—44% of which is available for lease—to help meet the demand.
Net absorption skyrockets
At the end of the fourth quarter, net demand stood at 1.1 million sq. ft., four times the amount of net absorption in the third quarter, and 12 times the amount recorded in Q4 2017. On an annual basis, 2018 ended the year with a total of 1.3 million sq. ft., compared to 2017 at 1.1 million sq. ft. The amount of space delivered to the market in Q4 2018 stood at 684,000 sq. ft., bringing the year-to-date amount to 1.4 million sq. ft., with 40.2% of that space available for lease. The major move-ins during the fourth quarter include Comet Signs taking occupancy of 166,000 sq. ft. at 5003 Stout Dr. in the South submarket, Southern Warehousing and Distributing moving into 111,800 sq. ft. at 3030 Aniol St. in the Northeast submarket, and Amazon with a move-in date of December 2018 into 100,000 sq. ft. at 6558 E. Campus Dr. in the North Central submarket.
Largest warehouse yet for H-E-B
There is currently 4.1 million sq. ft. under construction, with 44.1% available for lease, and all but about 266,000 sq. ft. is Warehouse/Distribution space. H-E-B, the grocery giant, recently had its groundbreaking ceremony for the San Antonio Super Regional Grocery Warehouse located along Foster Road between Houston Street and Highway 87. The facility itself will take up 1.6 million sq. ft., while the entire site is located on a total of 871 acres. The warehouse will stock 17,000 dry goods grocery items and ship out 180 trailers worth of product a day to San Antonio-area stores. Completion is scheduled for late 2019 to early 2020.
Tract within Cornerstone Business Park bought
Houston-based real estate company Hines bought 45 acres of land located north of Interstate 10 and just east
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Net Absorption by Property Type
-0.5
0.0
0.5
1.0
1.5
2.0
Q42008
Q42009
Q42010
Q42011
Q42012
Q42013
Q42014
Q42015
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Milli
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(SF)
Flex Manufacturing Warehouse/Distribution
Vacancy by Property Type
9.3%
3.4%
5.9%
0%
2%
4%
6%
8%
10%
12%
Q42008
Q42009
Q42010
Q42011
Q42012
Q42013
Q42014
Q42015
Q42016
Q42017
Q42018
Flex Manufacturing Warehouse/Distribution
Construction by Submarket
0.0 0.5 1.0 1.5 2.0 2.5
North Central
Comal County
Northeast
South
Millions (SF)
Pre-Leased Space Available Space
SAN ANTONIO INDUSTRIAL | Q4 2018
of I-410 at the end of Corner Ridge in the Northeast submarket. The tract of vacant land was sold by Adelman’s CIP Land Partners LP. Adjacent the land is the recently built 305,000-sq.-ft. Conn’s HomePlus distribution warehouse. It is reported that Hines is planning a multi-building industrial park on the land, their first industrial project in San Antonio. For reference, there is 80 million sq. ft. of warehouse/distribution inventory in the San Antonio industrial market with the largest concentration in the Northeast submarket at 36.2%, followed by the South submarket at 17.2% and the Northwest recording 13.7%.
Investment sales
Real Capital Analytics data reports year-to-date industrial sales volume for 2018 in the San Antonio area at $1.6 billion. The fourth quarter sales volume was $402.5 million compared to fourth quarter 2017 at $467.9 million, resulting in a year-over-year quarterly volume change of -14.0%. The primary capital composition for buyers in 2018 was made up of 45.5% private investors, and 21.3% cross-border. For sellers, the majority was 52.9% private investors, and 22.7% cross-border. In December, Exeter Property Group acquired Victory Packaging at 1610 Cornerway Blvd. in the Northeast submarket. Stag Industrial sold the 247,861-sq.-ft. warehouse/distribution property with 28,000 sq. ft. of office buildout in December.
Leasing activity
Leasing activity rose to 2.3 million sq. ft. during the fourth quarter of 2018 in the San Antonio industrial market. This is in comparison to 1.2 million sq. ft. leased in the third quarter, an increase of over 100%. The largest lease signings occurring in Q4 2018 included the 563,000-sq.-ft. lease signed by Ben E. Keith Company in Selma, Comal County; the 250,000-sq.-ft. deal inked by Calendar Club at 175 Southwestern Ave. in New Braunfels; and the 200,000-sq.-ft. renewal in the Tri County Distribution Center in Schertz, Guadalupe County. The total amount of leasing activity during 2018 was 5.2 million sq. ft., down about 15% from 2017’s 6.2 million-sq.-ft. tally.
Asking NNN rates remain unchanged
The industrial market in the San Antonio area saw triple net average monthly asking rents unchanged for the third consecutive quarter at $0.51 per sq. ft.—a continued record high—at the end of 2018. Using the same metrics, the highest submarket rent is in the Northwest submarket at $0.81 per sq. ft., and the lowest rate across the seven tracked submarkets is the Northeast at $0.43 per sq. ft. As the industrial market in the Alamo City continues to strengthen, expect rental rates to continue to increase.
Deliveries YTD 2018 by Submarket
0 100 200 300 400 500 600 700
Guadalupe County
North Central
Comal County
South
Northwest
Northeast
Thousands (SF)
Pre-Leased Space Available Space
Historical Investment Trends - Sales VolumeQuarterly Volume 12/31/18: $402,594,371Year-over-Year Change: -14.1%Source: Real Capital Analytics
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Q42009
Q42010
Q42011
Q42012
Q42013
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Q42015
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ons
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Quarterly Volume
Overall Average Asking NNN Rents by Submarket
$0.81
$0.43
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
Q4 2013 Q4 2014 Q4 2015 Q4 2016 Q4 2017 Q4 2018
Northwest N Central Guadalupe CBD South Comal Northeast
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SAN ANTONIO INDUSTRIAL | Q4 2018
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MARKET OVERVIEWSubmarket Stats
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Submarket StatisticsInventory
(SF)
Total Vacancy
(%)
Total Availability
(%)
Q4 2018 Total Net
Absorption (SF)
YTD Total Net
Absorption (SF)
Q4 2018 Deliveries
(SF)
YTD Deliveries
(SF)
Under Construction
(SF)
Total Avg Asking Rent ($//MO/PSF)
San Antonio Market Total 115,046,604 5.7 9.9 1,102,116 1,338,663 683,860 1,433,777 4,117,797 0.51
Information and data within this report were obtained from sources deemed to be reliable. No warranty or representation is made to guarantee its accuracy.
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90
83
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281
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281
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