SAN ANTONIO—Leah Gallagher was recently named Transwestern's city leader–San Antonio. In this role, her objectives are to grow the San Antonio operations and create new business opportunities for the firm. In this exclusive, Gallagher recently shared some insights into the local market and projections for the remainder of the year.

GlobeSt.com: What makes San Antonio popular for the healthcare, manufacturing and cyber security industries?

Leah Gallagher: San Antonio is home to the South Texas Medical Center which consists of over 900 acres of medical-related facilities and directly serves 38 counties. In addition to acting as a regional hub for medical care, San Antonio is also home to a growing bioscience research industry. The healthcare and biosciences industries employ over 172,000 people in San Antonio, earning approximately $8.9 billion in wages. With more than one of every six San Antonio workers employed by these industries, healthcare and biosciences are significant contributors to the city's workforce. In a 2016 study, the combined economic impact of San Antonio's healthcare and the bioscience industries totaled approximately $37 billion and added 50,000 net new jobs over the past decade, fueling San Antonio's growth.

San Antonio also has a large and diverse manufacturing industry, with a representation of every major sector of US manufacturing present in the community, including materials and electricity, equipment and metal, transportation, and diversified products. In July 2015, San Antonio was one of 12 communities chosen by the US Department of Commerce to join its Investing in Manufacturing Communities Partnership program. San Antonio applied as the Alamo Manufacturing Partnership, bringing together 13 partner organizations to collaboratively approach growing San Antonio's thriving manufacturing industry. In 2003, Toyota Motor Corp. chose San Antonio as the location of its new 2.2 million-square-foot manufacturing facility and began operations in November 2006, which generated over 3,100 jobs and produces 200,000 trucks annually. An additional 4,000 people work for on-site suppliers at the Toyota campus.

A leader in the cyber security revolution and a history of leadership in defense, San Antonio is home to the second-largest data center concentration in the United States and has more science and technology security-cleared workers than any US city outside of the Washington, DC area. Over 900 department of labor-designated IT companies are located in San Antonio, and over 80 are private-sector information security companies within the San Antonio Defense Technology Cluster. San Antonio's information technology and cyber security total workforce is made up of approximately 56,000 professionals and generates an economic impact of nearly $10 billion. Seven colleges and universities in San Antonio offer over 50 cyber-related degree programs.

GlobeSt.com: Please share some insight into national real estate capital looking for healthcare, industrial and office opportunities. Are there specific areas or properties that come to mind?

Gallagher: The strength of the South Texas Medical Center and the area of Texas it serves has created a strong medical office market in San Antonio. Medical office properties are in high demand throughout the nation, and San Antonio is no exception. Medical office properties tend to transact at cap rates 100 basis points lower than their office counterparts in San Antonio. However, given the increased appetite for medical product, we have seen high-quality medical office buildings transact at sub-6 cap rates.

There are currently several industrial opportunities on the market in San Antonio that are aggressively priced compared to the Austin market. Buyers are beginning to see the opportunity to acquire industrial properties in San Antonio at a significant discount to similar properties in Austin. The average cap rate spread is greater than 50 basis points.

There are plenty of office acquisition opportunities in San Antonio as well, but many of these will likely trade off-market. We have been tracking these office properties and stand ready to educate new buyers on the San Antonio market and introduce them to off-market opportunities.

GlobeSt.com: What qualities does southern Texas have that keeps investors coming back for more?

Gallagher: The economy and workforce in southern Texas are the primary factors that draw investor interest. While San Antonio is known for its deep-rooted history, art and ethnic diversity, this city's growth ranks high among large Texas cities and has emerged as one of the best environments for business. Local businesses and companies entering San Antonio enjoy a collaborative culture focused on creating opportunity. The city has continued to diversify its industries over the past several decades with government, healthcare, biomedical, finance and manufacturing being top industries in San Antonio. The city is home to many Fortune 500 companies, including Valero, USAA, Tesoro, iHeart Media Inc. and NuStar.

GlobeSt.com: What is the overall outlook for the southern Texas capital markets for this year?

Gallagher: Investors are attracted to markets with strong economic fundamentals. As cap rates continued to compress and pricing pushed replacement costs in the Austin market, investors have been looking to San Antonio for higher-yield investments. The fundamentals in the San Antonio market are enticing to investors, and I anticipate we will see an increase in sales volume over the next year.

GlobeSt.com: Any speed bumps in the road for the next three quarters?

Gallagher: Like most of Texas, San Antonio's economy and population will continue to grow and drive new business. We do not anticipate a near-term slowdown unless there is a national or global downturn.

GlobeSt.com: What makes San Antonio popular for the healthcare, manufacturing and cyber security industries?

GlobeSt.com: Please share some insight into national real estate capital looking for healthcare, industrial and office opportunities. Are there specific areas or properties that come to mind?

GlobeSt.com: What qualities does southern Texas have that keeps investors coming back for more?

GlobeSt.com: What is the overall outlook for the southern Texas capital markets for this year?

GlobeSt.com: Any speed bumps in the road for the next three quarters?

Instant Insights /

Investors Seek and Find Health, Industrial and Office Assets

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