San Antonio office market is feeling the pain of economic slump - Orlando Business Journal:

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According to the latest analysisby , at the end of the firstf quarter of 2009, San Antonio’s office sector was reportingb a vacancy rate of 18.3 percent quite a spike from the rate of 13.8 perceny posted at the same time last That number does not include space available for Take the latter into account, and the vacancy rate jumpsa to 20.7 percent as of the first quarter of 2009. And there is certainly plenty of sublease space to consider includingthe 275,000 squared feet downtown that is now vacant as a resulr of ’s move to Dallas.
Some other sublease spaceas have been created as a result ofthe city’s lagging housing market — as struggling home builders, mortgage and titls companies either downsized or closed shop “As the housing markeyt contracted, so did they,” says Kimberluy Gatley, senior vice president and director of researcu for NAI REOC Partners. Over the 12 months of a totalof 1.4 million square feet of office space was delivered to the San Antonio By comparison, there are only a handful of projects in the workss today — just under 420,000 square feet that is set to ente the market over the second, third and fourtgh quarters of 2009.
Economic concerns and “a debilitatingy lack of capital” have worked to bringh speculative office construction in San Antoni toa “screeching halt,” Gatley says. Given the slowdown in however, that halt is not a bad thing. Over the firsrt three months of this lessthan 168,000 square feet of gross leasinfg activity was recorded in the local office market, NAI REOC By comparison, quarterly averages for 2007 and 2008 were 283,000 and 229,000 square respectively. “... The national economyu is in the midst of amajot contraction, as evidenced by significant job observes Brian Harris, senior vice presidenft and partner for NAI REOC.
“Corporater America is just not expandingright now, so demande for office space is noticeably slow.” Overallp lease rates were up — albeit slightlyy on a year-over-year basis, accordinv to the latest NAI REOC research. As of March 31, 2009, the citywide average quoted rental ratewas $20.39 per squars foot — up 22 cents from the average of $20.17 recorded as of March 31, 2008. The rate at whichb average rents are moving uphas “definitelt slowed,” Gatley says. However, landlords are reluctan to quotelower rents.
As Gatleyg points out, owners will continur to test what the market will bear opting toward highertenant finish-out allowance or a few monthx of free rent over a race to the bottom on longer-term lease rates in order to entice tenants to their For all of the challenges bearin g down on the local office market these there has been some good news. California-based , in its 2009 National Office Report, statess that San Antonio is one of only twocitiews — the other being Austin — that will end this year absorbing more office spacwe than it gives back (positivw absorption).
And the long-term outlook for the office Marcus & Millichap notes, is even Another bit of good news came last week via a recognizerhamburger chain. Restaurants LP announced that it had purchasesd 300 Concord Plaza for its newcorporatew headquarters. The North Central Side buildinghspans 140,000 square feet. It is presently leasedf by San Antonio-based oil refiner Tesoro Corp. All told, when Tesork moves into its new headquarters onthe city’s far Northb Side this summer, it will come out of five multitenant officse properties in which it had been leasing space to the tune of roughly 250,000 square Thanks to the Whataburgedr deal, the amount of space that is slatex to come back into the market after Tesoro’s move has now been reducecd by 140,000 square feet, Gatleyy notes.
“People are still they are still coming toSan Antonio,” she adds.