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 4Q 2010 Medical report

Source: REOC San Antonio

Except for the tremendous growth that has taken place at Fort Sam Houston, commercial construction in the San Antonio area has slowed significantly over the past two years but confidence in the unfaltering strength of one of San Antonio’s leading industries, Healthcare & Bioscience, has supported a steady stream of new medical projects. 

The latest addition to the market came in the fourth quarter in the form of two new garden-office medical buildings totaling approximately 18,000 square feet at Schertz Parkway Professional Plaza located in the Northeast sector.  Now open for business, Northeast OB/GYN Associates occupies Building 1 (10,000 sf) and Northeast Endocrinology Associates, P.A. occupies Building 2 (8,000 sf). 

Despite the fact that we are still seeing a few new construction projects, the favorable winds that helped the medical market breeze through the recent recession have quieted over the past several months.  Activity within the medical real estate market remained relatively flat in the fourth quarter. New leases and expansions generated 27,311 square feet of positive net absorption, including the new Schertz Parkway Professional Plaza tenants.  The fourth quarter gain boosted the year-end total net gain to 135,199 square feet. 

At the close of the year, the citywide vacancy rate improved slightly to 18.2% compared to 18.4% last quarter and 18.5% recorded at the end of 2009.  The average quoted full-service rental rate saw an over-the-year gain of $0.88 to reach $22.59 per square foot per year but much of the gain can be attributed to the impact of higher rents quoted among newly completed properties while rents in the bulk of medical office space saw little change.  The upward trend that floated quoted rents up 4.1% from year-end 2009 to year-end 2010 flattened in the last quarter of the year evidenced by a one-cent decline since the third quarter. 

Although activity within the medical real estate market has slowed, the medical industry remains strong.  Medical office space is stable and other commercial properties continue to benefit from the spill-over of medical-related activity.

The slowed economy and uncertainty of healthcare reform have led many doctors and physician groups to focus their attention on business fundamentals.  Real estate needs can only be pursued once those fundamentals are secure and confidence is restored.

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