The good news in the city’s office market could have an unintended consequence — increased lag times for property sales.
In a new analysis of San Antonio’s office sector, real estate brokerage firm Marcus & Millichap Real Estate Investment Services states that the good economic news, combined with the “still-weak overall occupancy levels has created a wide expectations gap between buyers and sellers.”
Bolstered by the uptick in leasing activity, sellers are pricing their properties based on their expectations of increased revenue.
Meanwhile, buyers, still smarting from the latest bubble, are not anxious to purchase these properties on underwriting terms that are not based on current rents.
The upside: The city is indeed attracting a respectable amount of office users including a mix of new arrivals and some significant deals by existing firms.
In terms of the latter, this month alone, two locally based firms, Argo Group US Inc. and HVHC Inc., agreed to relocate their headquarters to the IBC Centre downtown.
Argo will occupy a little over 77,000 square feet in the building — which spans a total of some 370,000 square feet over two structures located at 130 E. Travis and 175 E. Houston. The company anticipates adding more than 300 workers to the site over the coming years.
HVHC will lease a total of 112,000 square feet for its executive and administrative offices. HVHC also plans to relocate and/or add more than 300 employees to the IBC Centre location.
San Antonio’s business-friendly environment has also made it attractive to new arrivals, including retail chains J. and Kohl’s. Both are developing call centers in the Alamo City. J. Crew plans to employ 200 full-time individuals, while also creating some part-time and seasonal positions.
Kohl’s plans to have 800 workers at its new customer-service center by 2013, Marcus & Millichap reports.
So while the sales side of the city’s office sector may have ebbed for now, San Antonio’s strong job market is poised to continue to bring office vacancy numbers down and rental rates up, the report concludes.