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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San Antonio office market sees healthy second quarter bounce

2Q09_SASnap_BLOG1The survey of more than 26 million square feet of competitive, multi-tenant office space revealed that healthy leasing activity in the second quarter generated over 232,000 square feet of positive net absorption led by the 145,000 square-foot Medtronics’ lease at Overlook at the Rim.

Market Overview:  In response to aggressive development in 2008, the citywide office market vacancy rate shot up to 17.1% at the end of last year.  As the national recession pushed its way into the San Antonio economy, leasing velocity slowed and the vacancy rate increased to 18.3% last quarter.  Leasing activity in the second quarter, however, offset first quarter losses resulting in a year-to-date net gain of 121,094 square feet of positive absorption which slightly improved the citywide vacancy rate to 18.0%.  By comparison, vacancy stood at a much healthier 13.9% last year at this time.  Higher vacancy has prompted additional incentives and has succeeded in keeping quoted rental rates relatively flat.  The citywide average quoted rental rate now stands at $20.41 per square foot per year on a full-service basis – up less than one percent over-the-year.

Looking Ahead:  Despite lingering economic uncertainties, the San Antonio market has remained more stable than many other areas but it still faces an uphill climb to full recovery.  Already challenged with leasing up a considerable amount of new space, the market must also backfill the space yet to be vacated by Tesoro Companies when they move into their new 618,000 square-foot facility at Ridgewood Park next quarter and leave behind roughly 150,000 square feet in several North Central office buildings.  The market must also deal with approximately 788,000 square feet of office sublease space.

For a more comprehensive report with submarket specific data, please contact Kim Gatley at kgatley@reocpartners.com to find out how you can purchase our Quarterly Office Market Report.

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