Increasing demand for more variety in San Antonio’s office market has finally been met, resulting in an influx of new construction and with it, higher vacancy rates.
But those aren’t expected to stick around for long.
According to REOC’s latest office market report, more than 263,000 square feet was added to the San Antonio market through three new office structures in the third quarter of this year. As a result of the new supply, the citywide vacancy rates ticked up from 17.5 percent last quarter to 18 percent at the end of September 2015.
However, due to explosive job growth and an increasing interest in companies planting roots in the San Antonio market, that vacancy rate is expected to turn right back around. REOC and the Xceligent Office Advisory Board, both of which surveyed more than 29.7 million square feet of office lease space for the report, expects recent job growth in the San Antonio-New Braunfels metro area to weigh down that rising vacancy. The increase of 35,000 jobs in the area over the past 12 months — an annual growth rate of 3.7 percent — will start to trigger jumps in the market’s occupancy levels.
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Regardless of the changes and growth San Antonio’s commercial real estate market has gone through over the past 12 months, it always boils down to the constants: it’s a cyclical market that will have ups and downs.
But there was a new conversation at yesterday’s 24th CCIM Symposium that got people excited and curious about how consistent those constants would be. The buzz was focused on transportation and technology, both in separate terms and how the two would intertwine and push commercial real estate development into the future.
As part of a panel discussion, Weston Urban President Randy Smith and GrayStreet Partners’ Managing Partner Kevin Covey — both from companies committed to revitalizing downtown San Antonio — repeatedly returned to the point that interest among technology companies in establishing a presence here will only continue to increase.
In part because of the city’s low cost of living, as well as attractive rental rates in comparison to other growing tech hubs across the country, San Antonio — specifically downtown San Antonio — has the opportunity to attract this strong pool of tenants and leverage them for continued urban development, both Smith and Covey said.
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San Antonio leaders are attempting to create a new Downtown National Register District. If they are successful, the payoff for prospective developers would be greater access to critical tax credits, which stakeholders expect will lead to increased redevelopment in the center city.
San Antonio’s Office of Historic Preservation contracted with Main Street Architects in June to help expand the range of historic downtown structures that could be considered eligible for state and federal tax credits. That effort has resulted in a proposed district, which could be approved by the Texas Historic Commission next year.
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San Antonio’s rising office market has often been attributed to new developments in the northwestern submarket, but there’s another pocket of the city that — despite significant rent gains — has gone largely unnoticed. The northeast.
According to JLL’s latest office insight report, rents in the bypassed area have risen by nearly $5 per square foot over the past three years, going from an average $19.26 per square foot back in 2012 up to $24.24 for the third quarter of this year. That increase has boosted the submarket from the fourth to the second most expensive office area in the city, with the far north central commanding first place.
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Downtown San Antonio is ready for a development renaissance! For land development opportunities, contact JLL’s Scott LaMontagne.
From Katie Burke, reporter for the San Antonio Business Journal:
At the Urban Land Institute’s Infill Workshop this morning, I sat next to someone who summed up downtown’s biggest problem in the clearest way I’ve heard it phrased: Everyone is on the edge of the pool and watching what’s going on inside, but not quite ready to jump in themselves.
The uncertainty that has long shrouded San Antonio’s urban core has created a multi-layered conundrum in terms of what to focus on first — residential, office, retail or leisure.
Speaking to the crowd, Centro CEO Pat DiGiovanni said that the biggest priority for the city organization right now is to make “downtown a special place.”
And that’s going to start by focusing on Houston Street. The 0.7-mile-long stretch is already seen as the most walkable, with plenty of retail opportunities lining the way.