Pubished: San Antonio Business Journal
By: Tricia Lynn Silva
Date: July 29, 2011

The second quarter of this year was a banner period for San Antonio’s industrial market.

And fueling the charge, in good measure, is the Eagle Ford Shale in South Texas, according to the second-quarter 2011 analysis by local real estate firm NAI REOC San Antonio.

This 24-county oil-and-gas play has already spurred major land plays by three Houston-based energy industry service firms, which have acquired a total of nearly 400 acres in the area.

Those companies include Weatherford Artificial Lift Systems, which closed on 208 acres along Interstate Highway 37 and Loop 1604 in Southeast San Antonio; and Baker Hughes, which has purchased 60 acres near Interstate Highway 37 and Highway 181 in Southeast Bexar County.

Weatherford’s plans, for example, include a $17.5 million operations facility that is expected to support up to 120 new jobs, NAI REOC reports. Baker-Hughes, meanwhile, is developing a new administrative headquarters for South Texas and a $30 million operations center.

Another high-profile name, Halliburton Co., has also made a major land play — to the tune of 150 acres in the same area as Weatherford, NAI REOC reports. Halliburton has not yet divulged plans for its recent land purchase.

“These are long-term plays,” notes John Greg Turcotte, senior vice president and partner in NAI REOC, of these land deals. These firms want to be close to the action at Eagle Ford Shale — which requires that they establish a presence in a leading city like San Antonio.

“They can’t service (the Eagle Ford Shale) out of Houston,” Turcotte continues. “They want to be within an hour of that formation.”

These latest deals speak to the impact that the Eagle Ford Shale is having on South Texas, including the San Antonio area.

Referring to a recent study by the Center for Community and Business Research at the University of Texas at San Antonio Institute for Economic Development, NAI REOC points out that by 2020, the Eagle Ford Shale is expected to support roughly 68,000 full-time jobs in South Texas and generate more than $21.5 billion in total economic output.

All three of the land deals involving the Houston companies equate to some new job generators for the San Antonio area, Turcotte says.

By the numbers

The Eagle Ford Shale has impacted leasing activity in the local industrial sector as well. Houston-based EOG Resources inked two leases at two Northeast Side distribution centers — Interchange East Distribution Center, where the firm will take down 147,840 square feet; and the City Park East Distribution Center, a total of 55,000 square feet.

While the Eagle Ford Shale play has certainly helped San Antonio’s industrial market, this real estate sector is seeing activity on other fronts as well. New leases by firms such as Operational Technologies, Goodman Networks and Berlin Packaging during the second quarter helped to put the market firmly in the black — to the tune of more than 320,000 square feet of positive space absorption, NAI REOC reports.

In a market that often sees leases in the range of 15,000 to 20,000 square feet — these latest deals ranged between 45,000 and 96,000 square feet. “That’s some pretty big bites for San Antonio,” says Turcotte of the second-quarter leases.

These wins also helped to offset earlier losses. At the end of the first three months of the year, the local industrial market recorded negative absorption of some 160,000 square feet. Three months later, the market was back in the black — posting positive absorption of more than 110,000 square feet.

Absorption is a measure of the net space leased or returned to the market over a given period.

The vacancy rate for the industrial market was essentially unchanged — going from 13.1 percent as of second quarter 2010 to 13.2 percent a year later, per NAI REOC’s latest analysis.

“We stayed pretty stable in terms of vacancy,” says Kim Gatley, senior vice president and director of research for NAI REOC.