As anticipated, the San Antonio distribution warehouse market was hit with American Standard’s departure in the third quarter. After deciding to relocate to Dallas, the kitchen and bath manufacturer vacated two Northeast properties leaving behind more than 408,000 square feet of vacant space. Healthy leasing activity, however, quickly re-tenanted the space vacated at the Tri-County Distribution Center with Hollingsworth Logistics (86,400 sf), Phoenix Group (73,600 sf) and Scholastic Books (44,800 sf) but American Standard’s space in the Rittiman East facility remains empty.
In all, local industrial properties experienced a total of 230,548 square feet of negative net absorption in the third quarter. As a result, the year-to-date total net gain was flattened to 5,159 square feet but remained in the black. The citywide vacancy rate increased to 13.9% compared to 13.1% last quarter but, despite American Standard’s move, vacancy is relatively stable compared to 13.8% recorded last year at this time.
Although some tenants have been reluctant to expand operations or sign long-term leases until the overall economy shows signs of further improvement, many have taken advantage of deep discounts and concessions available in the marketplace. The citywide average quoted triple net rental rate remained flat at $5.57 per square foot and tenants are expected to remain in the driver’s seat heading into 2011. Investment activity remains mostly limited to user sales. Recent transactions included the purchase of 5040 Space Center (57,600 sf) by Improved Piping Products and Whataburger Real Estate recently bought the 5757 Farinon facility.
Looking ahead, anticipated tenant moves will challenge the local industrial market in 2011. Upon completion of Sysco’s new facility currently under construction in the satellite community of Schertz, Sygma – a Sysco affiliate – will consolidate out of 241,500 square feet of multi-tenant space in the Rittiman Industrial Park in order to occupy the existing Sysco facility.