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 2012 office market update

Source: REOC San Antonio

The modest 1.2% annual job growth rate posted at the end of June along with a generally stabilized economy have contributed to increased leasing velocity and demand for office space.  Leasing activity seems to be picking up but two large tenant relocations spoiled what would have otherwise been a solid performance in the second quarter.  

AT&T emptied two buildings at 500 & 530 McCullough leaving 433,431 square feet dark in the downtown market and KCI completed their move out of what had been called KCI Tower to their newly constructed build-to-suit headquarters at 12930 IH-10 West in the NW sector.  These moves created a bump in the road to recovery.  Citywide vacancy jumped from 19.8% last quarter to 21.3% this quarter – up compared to 20.6% recorded in the same quarter last year.  The market experienced 355,622 square feet of negative net absorption in the second quarter which dragged the year-to-date total into the red to the tune of negative 97,882 square feet.

Meanwhile, rental rates have stabilized, for the most part.  Although most of the city’s sectors saw quoted rents step up over the quarter, the trend is not yet unanimous.  Investment activity appears to be on the rise but speculative development remains constrained by the current lending environment and upcoming availability of vacant space within existing properties.  On the heels of KCI’s move this quarter, additional blocks of space will be returned to the market as Nationwide Insurance and NuStar Energy complete their moves to build-to-suit facilities in the months ahead.  The migration of large users out of multi-tenant space to owner-occupied facilities is not a new occurrence in theSan Antoniomarket; it is part of the city’s more-conservative approach to development.  These tenants aren’t leaving the area – they’re making huge capital investments to solidify their presence here.  The spaces being left behind create opportunities to attract new companies to the area and accommodate the needs of existing tenants looking to expand.

Click to read related article Tenant relocations are ticking up San Antonio office-market vacancy rates (San Antonio Business Journal, 8-17-12)

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