San Antonio Office Market’s Strong Finish

SAN ANTONIO (CBRE) – Following a quarter of modest positive net absorption, the local office market ended the year with a much stronger one.

CBRE reported that the market had positive net absorption of 201,343 sf in the fourth quarter of last year, making this the second straight year of every quarter seeing positive net absorption. This also marked the fourth straight quarter where the market’s vacancy rate declined, falling 70 basis points quarter over quarter, finishing the year at 15.9 percent. This caused total space occupied in the market to increase to over 22.7 million sf.

In a year that has seen preleasing in product-under-construction reach 55 percent, preleased space fell by the end of the year. This was mainly because of product being delivered to the market and other projects breaking ground with no preleasing. The quarter finished with 315,027 sf preleased space, accounting for almost 33 percent of product currently under construction.

The market was led by the northwest submarket, which closed the quarter with 105,502 sf of positive net absorption. This was followed by 72,110 sf of positive net absorption in north central. Negative net absorption across submarkets in the quarter was very modest, with only two submarkets giving space back to the market. The northeast and far north central submarkets posted 4,886 sf and 1,768 sf of negative net absorption, respectively.

While not yet reaching their record levels from 2012, citywide average asking rates in the market rose for the third consecutive quarter. In the fourth quarter, rates increased $0.24 per sf quarter-over-quarter to $20.34 per sf on a full-service gross basis. This is more than double the rise experienced in the third quarter. The only submarkets to see average asking rates fall were the CBD and the south submarkets, which ended the quarter at $19.67 per sf and $15.50 per sf, respectively.