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 office market update for 4Q 2011

Source: REOC San Antonio

In the final quarter of 2011, San Antonio office market fundamentals continued on a sluggish path of recovery.  Citywide vacancy remains elevated at 20.0% – the highest in two decades – but rental rates have stabilized at $20.99 and demand for office space generated positive absorption in the fourth quarter.  New leases and expansions inked between October and December registered 90,325 square feet of positive net gain – an important step in the right direction. 

Local office properties continue to reap the benefits of a strong healthcare industry as well as the growing energy sector related to the Eagle Ford Shale play.  Although demand for office space generated a positive result in the final quarter of the year, it was not enough to completely offset the significant losses tallied earlier in the year.  The 2011 net absorption total remained in the red with 47,672 square feet of net loss – a significant setback compared to the annualized average of more than 200,000 square feet over the previous ten years.

The market saw no new deliveries in the fourth quarter but two existing buildings at Brooks City-Base were recently made available at the transitioning former Air Force Base facility adding a total of nearly 72,000 square feet.  At the close of 2011, the speculative construction pipeline delivered a lean 42,377 square feet of new product consisting of only one building – 17115 San Pedro Avenue which came online 17% preleased.  Construction completions are expected to remain light with new supply at its lowest level since the 1990’s.  As such, owners have an opportunity to fill vacant space ahead of the next construction cycle.  We expect a slow continuation of consistent growth heading into 2012 but growth is expected to be subdued due to several upcoming vacancies.  True growth potential is largely dependent upon job creation.

Click to read related article: San Antonio office market marked by ups, downs, in past year (San Antonio Business Journal, 1-20-12)

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