SAN ANTONIO-Thanks to the rebounding economy and increasing business from the Eagle Ford Shale play, the industrial sector continues experiencing positive net absorption and tightening vacancies. According to REOC San Antonio's Q3 report, leases and expansions generated 316,485 square feet of net absorption, while vacancy in the market – with an inventory of 32 million square feet – was 7.3%, down from 8.1% the previous quarter.
"If current leasing velocity continues through next quarter, the year-end absorption figure may surpass the 1.4 and 1.5 million square feet recorded in peak performance years of 2006 and 2007," says Kim Gatley, senior vice president and director of research for REOC San Antonio.
Though this is good news, on the other side of the coin, little new speculative space is being added to the mix. The report points out that "a lack of available space could derail the area's ability to attract new companies or retain expanding tenants."
Building 3 at Thousand Oaks Business Park, measuring 66,170 square feet, came online this quarter but it is the only speculative project delivered to the market so far this year and the only one expected through year-end. The report points out that developers are ready to launch new developments, but are reluctant to do so without a preleasing commitment.
How scarce is space? “More than two-thirds of the buildings surveyed currently stand at 100% occupancy; and, only 3% of the buildings offer 20,000 square feet or more," Gatley says. "Perhaps even more telling is the fact that only one existing building in the tracked set could immediately accommodate a tenant looking to lease 100,000 square feet and only a handful offer upcoming availabilities of that size."
In the near term, the report notes that industrial space will remain tight, but potential new projects will expand options for tenants. Until then, tenants will face higher lease costs.
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