The 28.8-million-square-foot general purpose, multi-tenant San Antonio office market remains weak as of the second quarter of 2012 according to Reis data. The quarter saw 208,000 square feet complete in two new buildings, but net absorption totaled just 3,000 as other space was emptied. The vacancy rate increased 50 basis points to 18.6%, and in July a return of negative net absorption pushed it to 18.8%. The two buildings that completed were the 107,600-square-foot The Bakery on Broadway and the 100,000-square-foot KCI Global Headquarters (see Special Real Estate Factors.)
Two more completions followed, leaving just 50,000 square feet under construction. In July the 109,000-square-foot Thousand Oaks I&II was finished, followed by the 300,000-square-foot NuStar Energy Headquarters in September. Reis predicts that a pick up in net absorption will reduce the multi-tenant vacancy rate to 18.3% by year-end 2012. A more rapid descent is forecast to follow during the 2012 to 2016 period, as new supply slows and demand picks up. By the end of the latter year the rate is expected to reach 13.1%, the least since 2000.
Rents have been edging up despite high vacancy. In the second quarter, as the average asking rent increased 0.2% to $20.01 psf and the average effective rent rose 0.1% to $15.99 psf. The year-over-year gains were 1.4% and 1.5%, respectively, and similar gains are forecast for 2012 as a whole. Each average slipped a penny in July. Rent gains are forecast to accelerate later in the forecast period, with the effective average rising by 3.0% in 2013, around 4.0% in 2014, and by more than 4.0% during the years following.
“At the end of the second quarter of 2012, San Antonio’s multi-tenant office market was sitting at a vacancy rate of 21.3%—up from 20.6% as of the second quarter of 2011,” according to NAI REOC as cited by the Business Journal.