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San Antonio Office Market Pointing Toward Recovery

July 20, 2010

Local office properties had 380,064 sf of positive net absorption in second quarter 2010, according to NAI REOC San Antonio.

“While most markets are still reeling from the extended recession and many are anxious about a potential double-dip in the economy, the San Antonio office market quietly experienced a very strong second quarter,” says Brian D. Harris, senior vice president and partner at NAI REOC San Antonio.

The citywide direct vacancy rate improved slightly to 18.3 percent versus 18.4 percent last quarter.

The central business district had 43,707 sf of positive net absorption in the second quarter.

The office rental rate has been stunted by the lingering vacancy among downtown office properties. Although the average quoted rental rate showed a nine-cent increase compared with last year at this time, it declined for the third consecutive quarter, dropping one cent from last quarter to $19.04 per sf per year.

Gross leasing activity in the suburban market led to 336,357 sf of positive net absorption in the second quarter, raising the year-to-date absorption total to 487,372 sf. Despite the net gain, new supply caused the suburban vacancy rate to increase slightly to 17.6 percent compared with 17.4 percent last quarter and 17.2 percent recorded a year ago.

The emerging far west sector had the greatest gain, accounting for 327,000 sf of the quarterly absorption total. Other than the far west, only the core north central and far north central sectors posted positive net absorption in the second quarter.

All sectors remain in positive territory on a year-to-date basis except core north central.