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 Releases 3Q 2015 Office Market Report

Source REOC San Antonio/Xceligent

Source REOC San Antonio/Xceligent

According to the survey of more than 29.7 million square feet of office lease space conducted by the research department of REOC San Antonio and reviewed by the Xceligent Office Advisory Board – a group of leading office brokers who meet quarterly to review and certify the analytic information, new leases and expansions recorded in the third quarter translated into 201,875 square feet of positive net absorption.

Leasing activity was led by Accenture which backfilled 45,137 square feet of the 84,150-square-foot building at 10931 Laureate, formerly occupied by Harland Clarke before the company migrated to fill the newly completed WestRidge One building across from The Shops at La Cantera. As a result, the Northwest sector experienced the greatest amount of absorption for the quarter and, subsequently, the year.

Offsetting the positive gains, three new office buildings totalling more than 263,000 square feet were delivered to the San Antonio market. In the Far North sector, new construction delivered two buildings including Heritage Oaks at Inwood III (109,000 sf) – a four-story, Class A building located inside Loop 1604 at Bitters Road – and RidgeWood Business Center II (54,217 sf) – a single-story value office project located outside Loop 1604 just east of US 281. While the RidgeWood building came online roughly 50% pre-leased to Boral Materials Technology (27, 515 sf), the Heritage Oaks building reported no pre-leasing. In the growing Far West sector, the One51 Office Centre (100,000 sf) also came online without any pre-leasing.

As the result of new supply outpacing demand, the citywide vacancy rate increased from 17.5% last quarter to 18.0% at the close of the third quarter. This trend extends through the first nine months of the year with new construction delivering more than 628,000 square feet compared to less than 444,000 square feet of absorption.

With the majority of new product added to the Class A subset, the vacancy rate for Class A properties climbed to 12.4% compared to 9.7% recorded in the same quarter a year ago. This trend is expected to be short-lived based on recent job growth in the San Antonio-New Braunfels metro area which saw an increase of 35,000 jobs over the past twelve months for an annual growth rate of 3.7%.

The citywide average quoted rental rate for all classes increased by $0.21 this quarter to reach $20.71 per square foot per year on a full-services basis marking a significant annual increase of 5.8%. The combined average asking rates for CBD and Non-CBD office properties are separated by only $0.67 but the difference in Class A rents favored the suburban market by $2.27. Citywide, the cost of renting Class A space climbed 4.6% over the year to reach an average of $26.46.

“Developers remain bullish on the local office market and confident that the stable local economy will continue to attract new businesses as well as support the expansion of existing tenants. The natural flight to well-located, high-quality properties will lead tenants to fill new product while creating opportunities within existing buildings as seen with the former Harland Clarke building,” says Kimberly Gatley, Senior Vice President and Director of Research for REOC San Antonio as well as a member of the Xceligent Office Advisory Board.

Click to download REOC San Antonio’s complete 3Q 2015 Office Market Report

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