REOC San Antonio
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Kim_Gatley
Kim Gatley
S
enior Vice President & Director of Research at REOC San Antonio

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Supply outweighing demand for San Antonio office market

REOC San Antonio Outlines No AlamoWith more than 263,000 square feet added to San Antonio’s supply of office space in the third quarter and plenty more in the pipeline, the market has finally hit the growing-pains period.

Following months of increasing rents, climbing absorption levels and dropping vacancy rates, supply has finally sped past the growing demand for office space in the city. But chances are, it won’t be for long.

According to REOC San Antonio’s third-quarter office report, the addition of three new office buildings in the Far North and Far West submarkets pushed citywide vacancy rates up to 18 percent at the close of the third quarter, up from 17.5 percent for the previous three-month period.

R.L. Worth & Associates delivered two of the three new office properties, both in the Far North sector. Heritage Oaks II, a four-story Class A property, added nearly 110,000 to the market, while RidgeWood Business Center II, a single-story value office product at Loop 1604 and east of Highway 281, contributed more than 54,200 square feet. The latter came online 50 percent preleased to Boral Materials Technology, which took over 27,515 square feet.

Even as the vacancy rate rose from 9.7 percent in third quarter 2014 to 12.4 percent in the recent third quarter, demand for Class A options in the San Antonio office market continues to rise, as with rents for those properties. Citywide, the cost to lease Class A space rose 4.6 percent over the year to an average of $26.46 per square foot.

And after paying close attention to those rising rates, developers are responding with several new projects.

The 158,000-square-foot Vista Corporate Center broke ground a couple of months ago at the southeast corner of Loop 1604 and I-10, along with Fulcrum Development’s Landmark Centre, both of which will hit the higher end of Class A office space in San Antonio. Bitter Blue’s 52,000-square-foot Huntington Center and the 129,015-square-foot WestRidge Two at La Cantera — two more Class A properties in the Northwest quadrant of the city — are slated for delivery in first quarter 2016. Prospective tenants now have a variety of options when it comes to space in San Antonio’s office market, which is adapting to its bigger size and developing attributes.

Click to read entire article: Supply outweighing demand for San Antonio office market (San Antonio Business Journal, 12-04-15)

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