SA Office Vacancy's 'Fairly Dramatic' First-Quarter ImprovementSA Office Vacancy's 'Fairly Dramatic' First-Quarter Improvementhttps://www.recenter.tamu.edu/news/newstalk-texas/?Item=101352015-05-22T11:16:00Z2015-05-22T00:00:00Z

SAN ANTONIO (REOC San Antonio) – The first three months of 2015 marked one of the strongest first-quarter starts on record for the city, reports REOC San Antonio in its latest market survey. Gross leasing activity translated into 371,200 sf of positive net absorption for the first quarter.

Positive activity and strong absorption yielded a "fairly dramatic" improvement in the citywide vacancy rate, which dropped from 18.3 percent at the end of 2014 to 17.5 percent at the close of the first quarter. Vacancy is also down from the 19.5 percent recorded in the same quarter last year.

Vacancy within the Class-A subset of top-tier properties remains below 10 percent. That submarket closed the quarter with a citywide vacancy rate of 9.5 percent, down from 9.9 percent last quarter and 10.2 percent a year ago.

Improved occupancy continues to support increased rental rates. Compared with last year at this time, the citywide average quoted rental rate for all classes increased by $0.30 to $20.07 per sf per year, an annual increase of 1.5 percent. The average rent for Class-A space climbed 2.6 percent with the quoted average currently standing at $25.93.

Roughly 818,000 sf of spec office space is currently under construction with the vast majority scheduled to come online before the end of the year. There were no new construction starts in the first quarter, but smaller projects are expected to be announced during the year.

Construction activity is primarily concentrated in the North West and Far North Central sectors.

"To date, reported preleasing activity puts projects currently under construction at roughly 31 percent occupied, which means vacancy rates could potentially take a hit later this year if more leases aren’t inked before these buildings come online," said Kim Gatley, REOC San Antonio's senior vice president and director of research. "The new wave of office space is not expected to remain vacant long. In a stable, growing market, tenants tend to follow a predictable pattern of flight to quality."

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