Source: NAI REOC San Antonio
The San Antonio medical market, totaling nearly 5.8 million square feet of tracked multi-tenant space has certainly proven to be the most recession-resistant of all the property types but vital signs slowed somewhat in the fourth quarter.
The relocation of UT Medicine physicians out of multi-tenant space and into the newly completed Medical Arts Research Center (MARC) led to 34,678 square feet of negative absorption in the final quarter of the year. Still, earlier activity kept the annual absorption total in the black with a net gain of 46,661 square feet. In reality, the fully occupied MARC facility (286,000 sf) added to the net gain in the statistical market combined for a respectable total of nearly 332,700 square feet of overall absorption for the year.
Nearly 220,000 square feet of new medical office inventory was delivered to the market in 2009 led by the Methodist Stone Oak Medical Office Building (116,000 sf), followed by Villa Rosa Medical Plaza (70,161 sf) and Lexington Plaza (33,431 sf). New supply outpaced demand which pushed the citywide vacancy rate up to 18.5% compared to 16.1% recorded at the end of 2008. It is important to note that, although vacancy in the multi-tenant market is up, the greater medical market including owner-occupied buildings and clinical facilities has remained relatively stable. At the same time, there has been a good deal of medical and medical-related activity within traditional office properties.
Asking rents for medical office space have likely peaked for this cycle. The citywide average quoted rental rate is up 3.2% over last year but retreated six cents compared to last quarter to close the year at $21.71 per square foot annually on a full-service basis. Looking ahead, the 18707 Hardy Oak (113,786 sf) is nearing completion and set to come online in the first quarter with roughly 9,000 square feet reportedly pre-leased but the majority of the half million square feet of planned projects will likely sit on the drawing boards for the better part of 2010.
