REOC San Antonio
Commercial Real Estate Since 1974   
Kim_Gatley
Kim Gatley
S
enior Vice President & Director of Research at REOC San Antonio

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REOC San Antonio releases 2Q 2010 Office stats

Source: REOC San Antonio

While most markets are still reeling from the recent recession and many are anxious about a potential double-dip in the economy, the San Antonio office market quietly experienced more than 380,000 square feet of positive net absorption in the second quarter which raised the year-to-date total to nearly half a million square feet. 

The strong second quarter performance was mainly attributable to the lease-up of two projects located in the growing Far West sector.  Westover Office Center (102,000 sf) recently landed Kohl’s to fill the vacant building and Sentry Gateway I & II (250,000 sf) came online 100% pre-leased presumably by government contractors related to the adjacent high-security facility. 

The positive second quarter gain was offset by the addition of the two-building Eilan project (205,726 sf) which came online with no pre-leasing reported.  As a result, the citywide direct vacancy rate improved only slightly to 18.3% versus 18.4% last quarter.  The impact of new supply and tenant downsizing over the past twelve months, however, softened the citywide vacancy compared to 17.9% recorded last year at this time.  The presence of nearly 703,000 square feet of sublease space is more evidence of a tough economy resulting in an overall vacancy rate of 20.9% versus 20.5% last quarter and 20.6% a year ago. 

While the significant amount of latent vacancy is troublesome to landlords, tenants are finding opportunities and taking advantage of concessions available in the marketplace even as quoted rental rates remain flat.  At the close of the second quarter, the citywide average asking rental rate ticked up only one cent over last quarter to $20.46 per square foot per year on a full-service basis – a meager five-cent increase (0.2%) compared to a year ago.  Despite some challenges, most are optimistic that San Antonio is primed for a healthy post-recession bounce and positioned to draw in new companies which will drive more job growth to generate demand for more office space.

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