Office Realty Sees Boost in Occupancy
San Antonio's office real estate market benefited from multiple large-scale leases during the third quarter, continuing an upward trend of positive occupancy. But the industrial market saw levels drop as tenants remain cautious about the economic climate.
Office vacancies continue to decline, reaching 16.7 percent, almost 3 percent lower than the second-quarter figures. The market experienced a positive net absorption of 115,000 square feet, bringing the year's total to about 450,000 square feet.
Large corporate expansions and moves are helping stabilize the sector, which saw occupancy levels drop to 19.6 percent during the second quarter of 2009.
Kohl's department store moved its customer service and operations center into a 102,000-square-foot space at Westover Hills, while XL Health and Christus Santa Rosa took occupancy of about 60,000 square feet total.
Continued economic growth and improvement in the job market are the keys to a resurgence in the office real estate market, experts said.
“Really, it's going to take jobs to get the office market back to where it needs to be, to where it was before the recession,” said Luis Garza, a local market analyst.. “Some jobs have been created, but we're going to need more jobs. Overall, we're going to need to see sustained job growth in order for the market to rebound more rapidly.”
While the office sector saw a bump in occupancy levels, the industrial real estate market took a step in the opposite direction. The relocation of American Standard, a plumbing fixture manufacturer, to Dallas left about 204,000 square feet on the market. During the quarter, the vacancy rate jumped to 9.5 percent, a slight increase from the 9.4 percent reported during the first quarter of 2010. The vacancy figure would have been worse, but occupancies from Phoenix Group and Hollingsworth Logistics helped soften the blow.
Garza anticipates the market will stall because demand is low. Tenants have the opportunity to drive rents, but in the long run landlords will cut back on concessions as the rates stabilize. Statewide, San Antonio fared well compared to the larger metro areas. Houston saw the lowest vacancy levels for both sectors, posting 16.5 percent and 6.5 percent for the office and industrial markets, respectively.
“San Antonio has fared well in comparison to other metro areas and large cities nationwide,” Garza said. But San Antonio “still felt the effects of the recession. So, I think it's going to be a matter of demand that's going to help the markets recover.”
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