Market Snapshot: It’s Sunny in San Antonio’s Office Sector
- Apr 02, 2015
San Antonio marked its fourth consecutive quarter of declining office vacancy rate and wrapped up 2014 on a strong note, according to recent data collected by CBRE.
In the final quarter of 2014, the San Antonio area registered a 15.9 percent vacancy rate, which translates into a 70 basis point decline quarter-over-quarter; an average asking rate of $20.34 per square foot; a net absorption of 201,343 square feet; and 960,080 square feet of office space under construction.
Vacancy dropped at 15.9 percent thanks to more than 800,000 square feet of positive net absorption throughout the year—the highest level since 2007—of which 201,343 square feet of positive net absorption was posted in Q4 2014. This brought the total space occupied in the market up to over 22.7 million square feet. Throughout 2014, the pre-leased space under construction reached 55 percent. However, that level started declining toward the end of the year as new completions or buildings that were under construction failed to secure pre-leasing agreements. On that note, Q4 2014 ended with 315,027 square feet pre-leased, which accounts for almost 33 percent of the total space under construction.
Citywide average asking rates on the market rose for the third consecutive quarter in Q4, yet without reaching the record set in 2012. The rates in the fourth quarter of 2014 increased by $0.24 per square foot quarter-over-quarter, reaching $20.34 per square foot on a full-service gross basis, more than double the rise in Q3 2014. The most notable price increases registered for Class C office spaces, followed by Class B rates, and finally by Class A product. The CBD and the South submarkets saw falling asking rates, ending the quarter at $19.67 per square foot and $15.50 per square foot, respectively.
Net absorption saw a slight improvement in Q4 2014—yet inferior to the first two quarters of the year—ending the year at 201,343 square feet. The annual total reached 864,215 square feet, marking the highest level since 2007 and the second consecutive year with all quarters seeing positive net absorption. The highest level of positive net absorption registered in the Northwest area, which posted 105,502 square feet. Negative net absorption was present in only two submarkets, which returned just over 6,000 square feet combined: Northeast registered 4,886 square feet of negative net absorption, followed by the Far North Central submarkets which returned 1,768 square feet to the market.
San Antonio’s office market delivered two more projects that together totaled 190,000 square feet, bringing the total completed projects in 2014 to over 200,000 square feet. Westridge One, the first building of the new Westridge at La Cantera Office Park added 129,015 square feet in the Northwest, and 250 W Nottingham Pl brought another 68,000 square feet of office space in the North Central neighborhood. Both buildings were fully leased upon completion. At the same time, two more projects broke ground, bringing the total office space under construction at the end of 2014 at 960,080 square feet: Westridge Two with 128,700 square feet and One51 Office Center with 100,000 square feet. Additionally, three more projects are expected to deliver over 300,000 square feet of office space by mid-2015.
Charts courtesy of CBRE