REOC San Antonio
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Kim Gatley
enior Vice President & Director of Research at REOC San Antonio

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New supply kicks San Antonio office vacancy upward, but not for long

offices-real-estate-iconIncreasing demand for more variety in San Antonio’s office market has finally been met, resulting in an influx of new construction and with it, higher vacancy rates.

But those aren’t expected to stick around for long.

According to REOC’s latest office market report, more than 263,000 square feet was added to the San Antonio market through three new office structures in the third quarter of this year. As a result of the new supply, the citywide vacancy rates ticked up from 17.5 percent last quarter to 18 percent at the end of September 2015.

However, due to explosive job growth and an increasing interest in companies planting roots in the San Antonio market, that vacancy rate is expected to turn right back around. REOC and the Xceligent Office Advisory Board, both of which surveyed more than 29.7 million square feet of office lease space for the report, expects recent job growth in the San Antonio-New Braunfels metro area to weigh down that rising vacancy. The increase of 35,000 jobs in the area over the past 12 months — an annual growth rate of 3.7 percent — will start to trigger jumps in the market’s occupancy levels.

Looking back, the past nine months of 2015 had more than 628,000 square feet delivered to the San Antonio office market, with the market absorbing less than 444,000 square feet of it.

Despite the market experiencing some growing pains, there are plenty of silver linings.

To start, the suburban office market maintained its occupancy levels, closing out the third quarter with a 15.6 percent vacancy rate compared to 15.5 percent for the same quarter in 2014.

Further, landlords are hanging on to the upper hand in the market, commanding higher rents across all property classes. REOC found that rental rates in the market increased by $0.21 this past quarter to hit $20.71 per square foot on a full-service basis. That equates to a substantial 5.8 percent annual increase citywide.

Click to read entire article: New supply kicks San Antonio office vacancy upward, but not for long (San Antonio Business Journal, 11-30-15)


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