Year-to-date deliveries surpass 9 million sq. ft.
The San Antonio industrial market has experienced significant growth in Q4 2023, with year-to-date deliveries reaching a record-high of 9.1 million sq. ft. This represents a remarkable achievement for the metro's industrial sector, with the South accounting for 47% of deliveries. Moreover, the average monthly rental rate (NNN) has reached a new high of $0.70 per sq. ft. These positive trends indicate a thriving industrial market in San Antonio.
Market Overview
In Q4, the overall vacancy rate in the San Antonio industrial market rose to 7.6%, representing a 420 basis point increase compared to the previous year. However, there has been a decrease in the Flex vacancy rate by 120 basis points, indicating a growing demand for Flex space. Warehouse/Distribution remains the driving force behind San Antonio's industrial market, contributing 367,161 sq. ft. (72%) towards the positive absorption in the fourth quarter.
Net absorption for the year has reached an impressive 2.3 million sq. ft., showing healthy demand for industrial space in San Antonio. Notable move-ins include Southern Warehousing occupying a 273,344-sq.-ft. distribution center and Love's Travel Stops & Country Stores filling a 253,000-sq.-ft. warehouse. These developments highlight the attractiveness of the market to businesses in need of industrial facilities.
Deliveries in the San Antonio industrial market have surpassed 3 million sq. ft. by the end of Q4 2023, a significant increase compared to the previous year. Year-to-date deliveries reached a record-high of 9.1 million sq. ft., with the South submarket accounting for 47% of these deliveries. Noteworthy completions include a 560,660-sq.-ft. distribution center in the South submarket and a 528,040-sq.-ft. distribution center along Interstate Highway 10 Frontage Road. Despite a decrease in construction compared to the previous year, the market has averaged 7.0 million sq. ft. of construction annually over the past three years.
The overall vacancy rate of 7.6% indicates a healthy market with plenty of opportunities for businesses seeking industrial space. The vacancy rates for Flex, Manufacturing, and Warehouse/Distribution space are 4.3%, 2.7%, and 9.1%, respectively. The decrease in Flex space vacancy can be attributed to its affordability and the strategic location of the metro.
Leasing activity in San Antonio's industrial market has remained consistent, with quarterly leasing velocity standing at 1.5 million sq. ft. Although this represents a decrease from the previous year, the market is still performing well compared to its 10-year average. Year-to-date leasing activity is at 7.4 million sq. ft., and significant deals have been signed by industry leaders such as Southern Warehousing and Weyerhaeuser.
Investment Sales Trends
In Q4 2023, the cumulative 12-month sales volume for San Antonio's industrial market was $34.6 million, representing a significant decrease from the previous year. Despite this, notable transactions were completed, including the acquisition of a 490,083-sq.-ft. distribution center by CREA Investments and NCA Realty Partners. Additionally, Mohr Capital acquired a 439,809-sq.-ft. distribution center, showcasing the continued interest of investors in the San Antonio industrial market.
Record-High Asking Rent
The average monthly rental rate (NNN) for San Antonio's industrial market has reached a record-high of $0.70 per sq. ft., showing a positive trend for the metro's industrial sector. This represents a 3% increase compared to the previous year. The rate per square foot for Flex Space is $1.19, while Manufacturing and Warehouse/Distribution Space rates are $0.56 and $0.64, respectively. The Guadalupe County and North Central submarkets command the highest overall monthly average rate at $0.97 per sq. ft., followed by the Northwest submarket at $0.87 per sq. ft.
To learn more about the San Antonio industrial market, reach out to Alex Babcock, Senior Research Analyst, at [email protected] or call 713-275-9618.
With its impressive growth, thriving market, and attractive rental rates, San Antonio's industrial sector presents exciting opportunities for businesses looking to establish or expand their operations.