After a positive first three quarters, the San Antonio industrial real estate market closed out Q4 2022 with extremely positive metrics, including growing rental rates, positive absorption, and ample construction deliveries.
San Antonio’s construction pipeline remains active, with several plans expected to be delivered in 2023 and 2024.
General Area Overview & Demographics
The third largest city in Texas, San Antonio has a population of 1.4 million as of 2023.
The median age is 33, and the median household income is $53,420. San Antonio is part of the “Texas Triangle” that consists of Dallas, Houston, Austin, and San Antonio.
San Antonio has a hot subtropical climate characterized by dry, hot summers and short, mild winters. The city receives very little snowfall but exists in one of the most flooding-prone regions of the county. Temperatures during the summer routinely exceed 90 degrees F.
San Antonio has an extremely diverse and growing economy with significant activity in the defense, healthcare, fossil fuels, and tourism sectors. The city is home to several Fortune 500 companies, such as Valero, NuStar Energy, iHeartMedia, and USAA.
Summary of San Antonio Industrial Real Estate Performance in Q4 2022
The San Antonio industrial real estate market had an extremely strong quarter with over 1.3 million square feet of positive absorption in Q4 2022. This quarter of positive absorption brought YTD absorption to over 4.5 million square feet. Amazon alone was responsible for the majority of quarterly absorption with its 1.0 million square foot fulfillment center off of US-90.
Average vacancy rates also rose to 7.4% in Q4 2022, but subleasing vacancies fell to 550,801 square feet—mostly due to lower leasing activity. Industrial submarkets with the lowest vacancy rates were New Braunfels, Tri-County, and Downtown at 2.9%, 3.3%, and 4.5%, respectively.
What Are Industrial Rents Like in San Antonio?
Average asking rates for industrial real estate in San Antonio rose 3.5% from last quarter to $6.46 in Q4 2022. Industrial rents have shown consistent annual increases since 2020. Sublease rental rates also increased to $4.66 per square foot in Q4 2022.
The submarkets with the highest average asking rates for industrial space were New Braunfels, North Central, Tri-County, and Northwest at $8.01, $7.97, $6.88, and $6.86 per square foot, respectively.
Purchase & Leasing Activity
Leasing activity in the San Antonio industrial space fell slightly, reflecting a small drop in demand. However, leasing and purchasing activity remains generally strong compared to several other metropolitan areas in the country.
San Antonio leased over 500,000 square feet of space in Q4 2022, the majority of which was warehouse space.
Notable Industrial Real Estate Deals in San Antonio in Q4 2022
The San Antonio industrial real estate market posted a handful of notable transactions in Q4 2022, including:
- Amazon’s 1.0 million square foot lease off of US-90;
- OEM’s 54,000 square foot transaction at Centerpoint Logistics park;
- Freedom Solar’s 34,000 square foot lease at Tri-County Crossing; and,
- CED’s 39,000 square foot lease at Ridgeview 35.
Decreases in San Antonio’s space thanks to high leasing activity are driving strong rental growths.
New Industrial Real Estate Development in San Antonio in Q4 2022
San Antonio added over 1.4 million square feet of industrial space this quarter, taking YTD additions to 6.06 million. The majority of this inventory addition was from warehouses and distribution centers.
Overall, Q4 2022 saw the addition of several notable projects, such as 243,000 square feet at Connection Industrial park.
San Antonio’s new construction pipeline also remains highly active, with over 2.4 million square feet of projects expected to deliver in 2023 and 2024, such as;
- 429,000 square feet at Selma Industrial Building;
- Over 450,000 square feet at Leon Creek Logistics Park; and,
- 240,000 square feet at Mid-City Industrial Park.
The three submarkets that saw the largest inventory additions in Q4 2022 were Comal county and South county.
Market Forecast for San Antonio’s Industrial Real Estate Market in 2023
San Antonio had an extremely strong year in 2022 and is expected to keep the momentum going well into 2023 and beyond.
With high demand and several construction projects in the pipeline, landlords and brokerages will have ample opportunity to acquire and lease high-quality space.
Additionally, San Antonio’s high job growth and low unemployment rates indicate a strong economy that will continue to bring employers into the city. Rent growth will remain strong as tenants compete for warehouse and distribution space.
Takeaways for Industrial Real Estate Investors
San Antonio industrial investors are in a great position going into the new year.
Suburban industrial space remains the highest in-demand type of property, so landlords should focus on acquiring new properties in major industrial parks outside of the CBD and downtown areas.
Like always, stay vigilant, do your research, and happy investing.
