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 2012 office market update

Source: REOC San Antonio

The San Antonio office market ended the year on a positive note, despite the large tenant shifts from leased space to owner-occupied facilities by companies such as Nationwide Insurance, KCI and NuStar Energy. Countering the shift, a steady stream of new leases and expansions allowed local office properties to end the year with a total of 163,087 square feet of positive net absorption. At year end, the citywide vacancy rate tightened to 20.4% compared to 20.9% posted last quarter but remained flat compared to 20.5% recorded in the same quarter of last year. 

Although softer than the 10-year historical median of 17%, the market did well to maintain and even gain a little, especially given the impact of major tenant moves as well as the delivery of new supply including the completed redevelopment of the Butterkrust Bakery which delivered The Bakery on Broadway (108,000 sf) along with nearly 41,000 square feet of office space that came online at Pearl Brewery earlier in the year.

Even though the citywide vacancy rate remained flat over the year, the perceived increase in leasing velocity has emboldened some landlords to test higher rental rates, but generally only in well-occupied buildings situated in highly desirable locations.  The only major project currently under construction and scheduled to deliver by mid-2013 is the second building at The Oaks at University Business Park (101,630 sf). Even though Class A space is nearing a point which might normally trigger new development and our inventory of large blocks of space is diminishing, it is unlikely that any large project will enter the pipeline in the current economy without a large user driving the need.

Looking ahead, the long-term outlook for the San Antonio office market remains positive but there is nothing on the horizon that suggests a dramatic change in overall market conditions as we head into 2013; instead, the market is expected to continue along a path of slow and steady recovery supported by stable job growth and limited speculative construction.

Click to read related article: Businesses are rediscovering San Antonio’s downtown vibe (San Antonio Business Journal, 2-1-13) and Longtime downtown tenant moving to Bakery (San Antonio Express-News, 1-31-13).

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