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 3Q 2012 office market update

Source: REOC San Antonio

After tenant moves increased vacancy last quarter, the San Antonio office market rebounded in the third quarter with 166,079 square feet of positive net absorption.  Leading new leases and expansions were two sizeable deals that backfilled space at the Farinon Office Building left behind by Nationwide Insurance upon the completion of their new build-to-suit operations center located along Highway 151 in Westover Hills on the city’sFar Westside.  United Healthcare leased 27,905 square feet and existing tenant BD (Becton Dickinson) expanded by 23,000 square feet to return the Farinon building to 100% occupied. Citywide vacancy improved slightly to 20.9% compared to 21.3% at the end of June but remains slightly softer than 20.1% recorded in the same quarter last year. Momentum will be challenged again in the fourth quarter when Nationwide Insurance finishes its move by vacating 4300 Centerview (93,299 sf).

There continues to be upward momentum in asking rental rates as evidenced by the nine-cent over-the-quarter increase which raised the citywide average to $20.94 per sq. ft. per year on a full-service basis; however, it remains seventeen cents or 0.8% lower than the average recorded a year ago. Meanwhile, the top-tier Class A product, which improved its direct vacancy rate to 13.1% this quarter compared to 16.3% a year ago, showed a moderate 2.6% annual increase in quoted rental rates to reach an average of $25.04 – up eighteen cents from last quarter. 

Although the outlook for the San Antonio office market remains strong, especially in light of new job growth, San Antonio’s approach to development will likely remain conservative heading into 2013 proceeding with only niche projects – like the mixed-use Lab Building at Pearl Brewery which was delivered this quarter – or projects that can secure significant pre-leasing, as was the case with The Oaks at University Park (101,630 sf) which is now underway after reportedly signing Univision (41,000 sf).

Click to read related article: Office market back in black in third quarter, REOC report finds (San Antonio Business Journal, 11-7-12).

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