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 2Q 2014 Office Market Update

New leases and expansions inked in the second quarter generated 297,378 square feet of positive net absorption which raised the year-to-date total gain to 612,054 square feet.  “Over the past ten years, there have been good years and lean years; on average, the local office market experienced roughly 350,000 square feet of net gain per year but that 10-year annual average has already been surpassed at the mid-way point this year,” explains Kim Gatley, Senior Vice President and Director of Research at REOC San Antonio, a locally-based full-service commercial real estate company.  “Current absorption levels are nearly double that achieved in all of 2013 and almost four times that experienced the preceding year which clearly illustrates the rising trend,” adds Gatley.

Vacancy rates reflect the positive net change in occupied space.  At the close of the second quarter, the citywide vacancy rate improved to 17.5% compared to 18.4% last quarter and 18.6% recorded in the same quarter a year ago.  More specifically, vacancy within the subset of top-tier Class A properties tightened to 8.9% compared to 10.2% last quarter and 10.6% recorded a year ago.  Even San Antonio’s challenged downtown market reports a Class A vacancy rate of 8.2%.  “Reduced availability, particularly the lack of large blocks of quality space, is pushing rents and driving new construction,” says Adam Berlin, Senior Vice President, Office Services, REOC San Antonio.

Through mid-year, there has not been any speculative office development delivered to the market – but that is about to change.  New construction is heating up with several new projects started in the second quarter.  “Lenders are becoming increasingly comfortable with the office market recovery and willing to place strategic bets on limited speculative office development,” says Blake Bonner, Senior Vice President and Director of Brokerage Operations for REOC San Antonio.

Employment growth continues to fuel the local office market.  For the twelve months ending June 2014, the greater San Antonio metro area added 22,500 jobs which equates to annual growth rate of 2.5%.  Gains throughout the market continue to support the local economy and stimulate the expansion of existing businesses which keeps the overall outlook positive.

Click to download REOC San Antonio’s full 2Q 2014 Office Market Report.

Read related article: San Antonio Office Market: What a difference a year makes (San Antonio Business Journal, 8-8-14)

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