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 retail market update – 2Q 2009

2Q09_SARetSnap_BlogAfter being hit earlier this year with the closures of national retailers such as Circuit City, Mervyn’s and Linens n’ Things, the faltering economy continued to impact the local retail market in the second quarter with the additional closure of Sportsman’s Warehouse at The Legacy.  As a result, San Antonio’s retail market vacancy rate climbed to 14.5% – a marked increase from the 11.4% recorded last year at this time. 

Although the recession was in full swing in other parts of the country last year at this time, the San Antonio market remained largely unaffected and continued moving through a strong expansion phase.  The impact of higher-priced new projects floated up average rental rates but now that the market is feeling the impact of a sluggish economy, quoted rents have begun to reflect the downturn.  The citywide average quoted triple net rental rate inched up to $18.33 per square foot annually.  Compared to a year ago, the average rent still reflects a healthy increase of eighty-six cents or 4.9% but the ten-cent gain over last quarter registers a growth rate of less than one percent indicating a flattening trend.

Second quarter completions totaled nearly 677,000 square feet of new retail space led by the addition of Woodlake Crossing (305,231 sf) featuring Target, Ross Dress for Less, Best Buy, and others.  The sucessful preleasing of the new northeast power center contributed to the 366,981 square feet of positive net absorption in the second quarter.  Large vacancies left behind by victims of the national recession reduce the need for additional new space.  Speculative development continues to expand the citywide inventory but at a dramatically slower pace.  Less than 849,000 square feet of new retail space has been delivered to the area year-to-date with less than 250,000 square feet expected to come online by year’s end.  Easing construction will certainly help the market recover by reducing the pressure of new supply but store closures will continue to present a challenge through the remainder of the year.  Smith & Hawken, for example, recently announced that it will close all 56 stores across the country including the newly opened location at Quarry Village.

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