Q1 2023 Industrial Real Estate Report: San Antonio, TX
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
San Antonio, Texas is renowned for its iconic landmarks, such as the Alamo and the vibrant River Walk. The city boasts a diverse and thriving economy, driven by major industries like healthcare, military and defense, tourism, and technology.
With a population of 2.4 million and a growth rate of 1.7%, San Antonio's industrial real estate market experienced a robust construction pipeline and strong absorption in Q1 2023.
General Area Overview & Demographics
Located in the southern part of Texas, San Antonio is a culturally rich and vibrant city. It blends history, modern amenities, and a diverse population, making it the second-most populous city in Texas and the seventh-largest in the United States.
The Alamo, symbolizing Texas independence, and the picturesque River Walk with its array of shops, restaurants, and hotels, attract millions of visitors annually.
San Antonio boasts a diverse demographic, with a significant Hispanic or Latino population, accounting for around 64% of residents. Additionally, the city is home to sizable populations of non-Hispanic Whites, African Americans, and Asian Americans.
With a median age of approximately 34 years old, San Antonio's population skews relatively young. The city's lower cost of living compared to other major cities in Texas and the United States makes it an appealing destination for families, young professionals, and retirees, yet the state of Texas struggles to maintain healthy public housing.
Economy and Education of San Antonio, TX
San Antonio's economy is robust and diversified, with key sectors including healthcare, military, tourism, and technology. The presence of various military installations, including Joint Base San Antonio, contributes to the city's defense and aerospace industries. Notably, the state of Texas is one of the most expensive cities to purchase real estate.
San Antonio takes pride in its education system, offering numerous public and private schools to serve the community. The city is also home to the University of Texas at San Antonio (UTSA), the largest university in the area.
Summary of San Antonio Industrial Real Estate Performance in Q1 2023
In the first quarter of 2023, total vacancies for San Antonio industrial real estate reached 7.4%. Notably, Guadalupe County reported the highest vacancy rate at 65%, while the Far West submarket had the lowest vacancy rate at 0%.
Q1 2023 saw 1.09 million square feet of industrial absorption in San Antonio, with 1.029 million square feet occurring in the city's Suburban submarket.
What Are Industrial Real Estate Rents Like in San Antonio, TX?
The average direct asking rent for San Antonio industrial real estate was $7.10 per square foot.
The North Central submarket had the highest average rent at $9.50 per square foot, while the South submarket posted the lowest at $6.19 per square foot.
Purchase & Leasing Activity
Leasing activity in the first quarter exceeded 1.1 million square feet, marking a 115% increase compared to the previous quarter. However, sales volume for the quarter declined by 39% year-over-year, reaching $259 million in transactions.
Notable Industrial Real Estate Deals in San Antonio in Q1 2023
During the first quarter of 2023, there were several noteworthy deals that took place for San Antonio industrial real estate market, including:
- Mohr Capital purchased 439,809 square feet at the Foster Ridge II property.
- UBS purchased 300,000 square feet at 110 Cascade Drive.
- Tradelane Properties purchased 180,000 square feet at 1228 Cornerway Blvd.
- Westport Axle leased 115,760 square feet at 17654 Ben E Keith Way.
These transactions represent a selection of notable activities that took place in the market.
New Industrial Real Estate Development Activity in San Antonio in Q1 2023
The first quarter of 2023 saw 6.8 million square feet of San Antonio industrial real estate under construction, with the majority of that space located in the city's Northeast submarket.
Additionally, 3.2 million square feet were delivered during the same period, with 2.2 million square feet of those deliveries in the South submarket.
Market Forecast for San Antonio's Industrial Real Estate Market
As the year unfolds, a significant number of new deliveries are expected, leading to a higher ratio of supply to current tenant demand and subsequently increasing vacancy rates.
Experts predict that industrial vacancies in San Antonio could rise to 6% by the year's end.
Takeaways for Industrial Real Estate Investors
San Antonio is rapidly emerging as an industrial hub, boasting more affordable Class A rents than its popular competitor, Houston. While tenant demand currently lags behind supply, the situation may reverse as the city gains popularity.
Investors can consider acquiring new deliveries as leasing opportunities or waiting until tenant demand catches up to supply to contribute to the pipeline. Careful market observation and wise investment choices are essential moving forward.
Methodology
This report was written with property information from the MyEListing.com platform in corroboration with other freely available commercial real estate research data.
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