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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Tenant moves pain office market

3Q09_SASnap_BlogEven though South Texas has been less affected than other areas by the recent economic downturn, national recessionary pressures have pushed into the San Antonio market. Less than 300,000 square feet of speculative office space is currently under construction – a mere fraction of the 1.4 million square feet that was under construction a year ago.

Despite economic challenges, the San Antonio office market managed to maintain more than 100,000 square feet of positive net absorption at mid-year but activity in the third quarter generated nearly 148,000 square feet of negative net absorption which dragged the market into the red with a total loss of 38,571 square feet year-to-date. Although several sizeable leases were signed in the third quarter, the largest of which was a GSA lease of more the 50,000 square feet at Bank of America Plaza, the total was not enough to offset overall losses. Upon the completion of its new 618,000 square-foot headquarters facility located at Ridgewood Park in the Far North Central sector, Tesoro Companies vacated four different Core North Central office buildings which dumped roughly 150,000 square feet back onto the market. The decision by Wells Fargo to vacate 72,000 square feet at Centerview Crossing in the Northwest quadrant in order to consolidate into the Far West campus facility acquired with its recent takeover of Wachovia also contributed to the loss in the third quarter.

At the close of the third quarter, the citywide direct vacancy rate climbed to 18.4% – the highest recorded in the past five years. The addition of nearly 664,000 square feet of sublease space softens the overall vacancy rate even further to 21.0%. Higher vacancy has kept quoted rental rates flat while prompting many landlords to offer significant incentives to attract tenant activity. Compared to many major cities, San Antonio offers bargain rental rates. The citywide average quoted rental rate currently stands at $20.41 per square foot per year on a full-service basis – unchanged from last quarter and up less than one percent over this time last year.

Read the release as reported in the San Antonio Business Journal, October 23, 2009, San Antonio office market looking to overcome vacancy-rate woes.

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