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 retail market update

Source: REOC San Antonio

Building on the moderate performance of 2011, San Antonio retail properties experienced positive gains in the first quarter which moved the market further towards recovery.  In the absence of any significant speculative construction projects, leasing activity has been focused on re-tenanting existing vacant spaces. 

As anticipated, the closure of five area RoomStore locations countered some of the gains generated by new leases and expansions signed in the first three months of the year.  Still, the San Antonio retail market closed the first quarter with 86,814 square feet of positive net absorption. 

In response, the citywide vacancy rate improved to 12.9% compared to 13.2% recorded in the same quarter last year. Meanwhile, the average asking rental rate for retail space remained relatively flat at $18.14 per square foot per year on a triple net basis.  As spaces darkened by the recession continue to fill and the vacancy rate tightens, rental rates are expected to experience more significant upward pressure but dramatic changes are not expected until the market sees the return of new construction.   

No new projects were added in the first quarter but the largest project nearing completion and set to come online in the second quarter is the H-E-B Plus center at Bandera & Loop 1604 (208,000 sf).  Investment activity in the first quarter was led by the purchase of the former Target store (97,348 sf) at 5330 Walzem Road by United Fashions of Texas, a women’s apparel retailer which plans to reposition the property and divide the big box into a multi-tenant project starting with a new Melrose store to open later this year.  Some retailers continue to face challenges, like Best Buy which will close its Woodlake Crossing store, but investors and consumers alike appear to be more optimistic about the direction of the economy.

Click to read related article:  Trader Joe’s, grocers taking advantage of San Antonio’s big-box vacancies (San Antonio Business Journal, 5-4-12)

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