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 1Q 2012 office market update

Source: REOC San Antonio

The San Antoniooffice market is expected to face increased vacancy later in 2012 resulting from several large users like NuStar Energy, KCI, and Nationwide Insurance vacating multi-tenant office buildings in order to occupy newly constructed build-to-suit facilities, but healthy leasing activity in the first three months generated 215,922 square feet of positive net absorption.  This marks the third consecutive quarter of positive net gain for the local office market and the largest since mid-year 2010. 

The addition of the  newly completed Bakery on Broadway project along with newly available existing space at Brooks City-Base worked to keep the citywide office vacancy rate relatively flat at 19.8%.  The additional space flattened improvement in the citywide vacancy rate that might have been expected from the positive absorption posted this quarter.  The citywide direct vacancy rate saw only a slight improvement compared to 20.0% last quarter and softened slightly compared to 19.4% recorded a year ago.  The addition of sublease space currently available in the marketplace yields an overall citywide vacancy rate of 21.3% – again, relatively stable compared to 21.6% recorded last year at this time.  The Class A submarket stands at a much healthier 13.6%.  Softer market conditions have opened up the opportunity for tenants to upgrade into Class A buildings; consequently, the number of large blocks of available space within top-tier buildings is shrinking.

Rental rates continued to fluctuate in the first quarter as landlords work to find the balance between being competitive and maximizing their returns.  The citywide average quoted rental rate dropped twenty-four cents from last quarter to land at $20.75 per square foot per year on a full-service basis – down eight cents from the same quarter last year for a rather flat annual decrease of 0.4%.  Asking rental rates for Class A product saw a modest annual increase of 1.9% to reach $24.51.  

Click to read related article Alamo City’s office market begins 2012 on strong note (San Antonio Business Journal, 5-11-12)

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