Source: NAI REOC San Antonio

In the midst of economic turbulence, the San Antonio office market ended the year with signs of stabilization.  According to NAI REOC San Antonio, fourth quarter leasing activity resulted in 27,575 square feet of positive net absorption led by the lease of 35,317 square feet at Colonial Center by a school tenant.  

The net result of all office transactions and tenant moves throughout the year led to a remarkably flat net gain of 186 square feet.  Offsetting the small gain, remnants of new construction which was started before the market turned delivered nearly 235,000 square feet of new office inventory in 2009.  New supply pushed the citywide direct vacancy rate up to 18.6% – the highest recorded in the past five years.  On the positive side, the total amount of available sublease space retracted to less than 629,000 square feet – a reduction of nearly 35,000 square feet compared to the previous quarter.  Still, sublease space softened the overall vacancy rate to 21.0%.

Higher vacancy continues to prompt many landlords to offer significant incentives to attract tenant activity and works to keep quoted rental rates flat.  At the close of the fourth quarter, the citywide average quoted rental rate increased slightly to $20.44 per square foot per year on a full-service basis – up three cents from last quarter and less than one percent over this time last year. 

Looking ahead, less than 300,000 square feet of speculative office space is currently under construction and set to come online in 2010 led by the Eilan project consisting of two office buildings totaling nearly 206,000 square feet located at I-10 & La Cantera Parkway.  Overall, leasing velocity will remain slow heading into the first quarter but is expected to pick up in the latter part of the year.