Positive Signs in Third Quarter Suggest Stronger 2012

By Camelia Bulea, Associate Editor

Signs of improvement exhibited during the third quarter suggest suggest a stable foundation for the San Antonio real estate market in 2012. At least that’s what commercial real estate services firm NAI REOC suggests.

This is despite some negative trends. In the third quarter, the company measured an average office vacancy rate of 19.9 percent citywide. That was an increase from 18.7 percent in the same quarter of the previous year, and the downtown market was particularly hurt by the departure of AT&T, which vacated about 300,000 square feet of space, causing the submarket’s vacancy rate to rise to about 30 percent. AT&T could vacate another 430,000 square feet of space at McCullough Avenue next year, causing an additional hole in the downtown office market. Meanwhile, the suburban office market recorded a net absorption of only 99,500 square feet.

Yet the Central Business District saw some major leasing transactions, including HVHC Inc.’s move into IBC Centre. The third quarter activity generated 165,530 square feet of positive net absorption, helping to offset losses posted by the departure of AT&T. Overall, the vacancy rate in the CBD remained stable at 24 percent.

And while there could be a minor setback in the retail market during the last quarter of 2011 due to the closing of three shopping centers–Borders bookstores, The Forum and Huebner Oaks shopping center–it did exhibit improved leasing activity in the third quarter, thanks to 92,032 square feet of positive net absorption citywide. Overall, the vacancy rate declined slightly during that quarter, to 12.8 percent, while rental rates grew to an average of $18.70 per square foot, up from last year’s $17.92.

Although the office and retail markets could still record some minor setbacks in the near future, 2012 appears to be a positive year for the city’s commercial real estate market. Major companies are expected to expand or relocate there due to factors like the strong business environment and the state’s economy.