Mission Mercado, at the corner of Southwest Military Drive and Roosevelt Avenue, is one of the newest commercial centers on the South Side. Photo by Steve Valdez

By Tony Cantu
Contributing Writer

The Toyota plant figured prominently in a recently unveiled industrial market trends report – the auto maker's assembly line slowdown emerged as a force contributing to sluggish leasing activity on the city's South Side overall.

A recently completed report by Grubb & Ellis provides a third-quarter snapshot of industrial leasing activity at various city sectors – including the South Side of town – in the industrial leasing market.

Overall, the South Side posted losses – nearly 180,000 square feet of space vacated by tenants in the last quarter – attributed to the Toyota plant's temporary closure.

“The industrial market in San Antonio has reached a slump because of the downturn in the auto industry with Toyota Manufacturing's temporary plant closure,” Grubb & Ellis researchers wrote in their report. “Some 200 temporary jobs were cut in June with the possibility of others in the future, slightly rising San Antonio's unemployment rate reported at 5 percent in August versus the national average of 6.1 percent.”

A decreased demand for its gas-guzzling Tundra trucks prompted Toyota officials to shut the plant down for three months while it rid itself of excess vehicle inventory and forced the company to cut 200 temporary workers.

Still, the ripple effects of the plant's temporary closure were felt in the overall market, said Bob Treviño, a senior vice president of Grubb & Ellis. The South Side joined downtown San Antonio – which lost just 864 square feet of space last quarter – as one of only two parts of the city posting losses.

“That's probably where that came from,” he said of the negative growth. “Some of the suppliers for Toyota started scaling back.”

Another project on the South Side that has also seen delays is the new Mission Mercado retail center at the intersection of Southwest Military Drive and Roosevelt Avenue. Bill Ozer, the broker for Mission Mercado, said the center's owner, Houston-based Option One, is in the process of selling it.

“It's almost finished, but we need to get the sidewalks completed, connect the sprinklers,” Ozer said. “It's a good location, a busy corner with a lot of traffic.”

Ozer said the project was expected to open a year ago, at which time he had retailers such as a dentist, ice cream shop and possibly a bank interested in being tenants. Now, as the project awaits its new owners, it has been the target of vandals and graffiti.

“One weekend, vandals broke 12 windows,” Ozer said. “We're moving towards the finish line. Hopefully, the change of ownership will be good.”

According to the study, the South Side posted a vacancy rate of 6.7 percent throughout its 7.5 million square feet of industrial space. All told, 506,370 square feet of space – excluding buildings less than 10,000 square feet – was reported as vacant in the third quarter, according to the report.

But in the third quarter, 179,892 square feet of space was vacated by tenants – the biggest exodus in the entire city. The South Side joined only the central business district – which lost a mere 864 square feet of space last quarter – as sectors that experienced negative absorption rates.

Year to date, the South Side lost a net of 49,011 square feet of space – a total offset by positive gains in the prior two quarters, explained Grubb & Ellis research analyst Katie Edwards. While 179,892 square feet of space were vacated last quarter, the South Side absorbed 124,000 square feet in the first quarter and 7,000 square feet during the second quarter, Edwards said.

“That's why that averages out for the year so far to 49,000 square feet of negative growth,” she said.

But Treviño said the sector would rebound once market forces improve, adding that the sector's vacancy rate is still better than the overall rate for the city.

“The vacancy rate is only 6.7 percent in the South market, and that's pretty good when the San Antonio rate is 8 percent,” Treviño. “It's typical ebb and flow, and I don't expect it to get worse.”

Despite the overall downturns for the South Side – and the Toyota Tundra plant's role in that sluggishness – Grubb & Ellis researchers predicted the market would likely rebound now that the plant has resumed activity.

“The positive side to the temporary break in Toyota production will be the redistribution of vehicle production that should bring more jobs to the San Antonio area as the plant reaches its full potential over the next few years,” researchers wrote.

Treviño agreed, adding that the plant has room for expansion and could even change its product line to meet market demand.

“Toyota long term is going to be fine,” he said. “They have room to expand and change their product line, even add new lines if they have to. They could switch to make hybrids.”

Editor Noi Mahoney contributed to this article