Medical office market still expanding

​​SAN ANTONIO – ​Leasing activity and net absorption within the
city’s 7 million-plus sf of medical-only office lease space accelerated moderately and rental rates
ticked higher while major hospital projects continue to expand area facilities. ​

According to REOC’s quarterly survey of medical office properties, demand for medical office lease
space generated 12,633 sf of positive net absorption in the second quarter. While not
exceptionally strong, absorption remained positive and boosted the year-to-date total to 30,648 sf.

Although still high, the citywide vacancy rate within medical-only office buildings improved a little to
20.1 percent compared with 20.3 percent last quarter, but vacancy remains slightly elevated compared with 19.5 percent recorded in the same quarter of 2015. 

New construction has yet to deliver any new medical office buildings to the market through mid-year,
but five new projects totaling nearly 200,000 sf of new medical office space are expected to
reach completion before the end of the year. Combined, the five buildings currently report a preleasing
occupancy rate of 70 percent.

Medical office rents, although somewhat slow to gain momentum to this point in the market cycle,
reached a citywide average of $24.59 per sf on an annual full-service basis at the end of the
second quarter, which marks an increase of $0.54 compared with mid-year 2015 for a modest annual
growth rate of 2.2 percent. Top-tier Class A properties command a higher average of $28.09, which varies by location with averages ranging from $24.07 in the CBD to $31.76 in the Far North
Central sector. ​