CBRE: San Antonio office market’s growing pains

​​​SAN ANTONIO – Everyone knew it was coming, but now that
rents are dipping and vacancy rates are bubbling up, it’s clear that San
Antonio’s office market is having some growing pains.

In first quarter 2016, four projects added more than 320,000
sf. And with another 513,323 sf in the pipeline, the market is catching up with
some of its growth as it heads toward becoming a higher quality market.

According to CBRE’s San Antonio 1Q 2016 Office MarketView report,
the amount of space delivered in 1Q2016 is nearly 50 percent of the total
delivered throughout all of last year.

While that primes this year to be one of the most active in
terms of delivered construction, it also means that the market will need some
time to adjust.

​​​CBRE found that the overall occupier demand is
beginning to wane, posting the lowest first quarter positive absorption since
2009 with nearly 127,600 sf. And the addition of more than 280,000 sf of vacant
new product boosted vacancy rates up to 16.8 percent.

The small dip in rents is largely attributed to properties
making the shift from full-service to the triple-net rates typical for
higher-end buildings. San Antonio’s rental average actually increased $0.35 per
sf to $17.31 per sf.

Speaking of higher-end buildings, nearly 100,000
sf of the quarter’s positive net absorption was for space in Class A
buildings, indicating tenant demand for upscale product in San Antonio is
strengthening. Rents in those Class A buildings also increased by $0.21 per sf
to $26.17 per sf.