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 first quarter of 2009, San Antonio’s officse sector was reporting a vacancy rate of 18.3 percent — quite a spike from the rate of 13.8 percenf posted at the same time last That number does not include space availablr for subleasing. Take the latter into account, and the vacancty rate jumps to 20.7 percent as of the first quartedrof 2009. And there is certainly plenty of subleasw space toconsider — including the 275,000 square feet downtown that is now vacant as a result of ’w move to Dallas.
Some other sublease spaces have been createsd as a result ofthe city’ws lagging housing market — as struggling home builders, mortgags and title companies either downsizedf or closed shop “As the housing market contracted, so did they,” says Kimberlyy Gatley, senior vice president and directo of research for NAI REOC Over the 12 months of 2008, a total of 1.4 milliom square feet of office space was delivered to the San Antonioo market. By comparison, there are only a handfulk of projects in the workstodayy — just under 420,000 square feet that is set to enteer the market over the third and fourth quarters of 2009.
Economic concerns and “a debilitating lack of capital” have worked to brinbg speculative office construction in San Antonio toa “screechinvg halt,” Gatley says. Given the slowdown in however, that halt is not a bad Over the first three months of this lessthan 168,000 square feet of gross leasing activity was recorde d in the local office market, NAI REOC By comparison, quarterly averagezs for 2007 and 2008 were 283,000 and 229,00p0 square feet, respectively. “...
The national economy is in the midstt of amajor contraction, as evidenced by significant job observes Brian Harris, senior vice presidengt and partner for NAI “Corporate America is just not expanding rightg now, so demand for offices space is noticeably slow.” Overall lease rate s were up — albeit slightly on a year-over-year basis, according to the latest NAI REOC research. As of Marcbh 31, 2009, the citywidwe average quoted rental ratewas $20.39 per square foot up 22 cents from the averager of $20.17 recorded as of Marchg 31, 2008. The rate at which average rentzs are moving uphas “definitelyg slowed,” Gatley says.
However, landlordzs are reluctant to quote lower As Gatleypoints out, owners will continue to test what the market will bear opting toward higher tenant finish-out allowances or a few monthd of free rent over a race to the botton on longer-term lease rates in order to entice tenants to theier properties. For all of the challengess bearing down on the local officd marketthese days, there has been some good Encino, California-based , in its 2009 National Office Report, states that San Antonio is one of only two cities the other being Austihn — that will end this year absorbing more office space than it gives back (positive absorption).
And the long-term outloojk for the office market, Marcus Millichap notes, is even brighter. Another bit of good news came last week via a recognizefhamburger chain. Restaurants LP announcedr that it had purchased 300 Concord Plaza for its newcorporate headquarters. The North Centralk Side buildingspans 140,000 square feet. It is presentlt leased by San Antonio-based oil refinerr Tesoro Corp. All told, when Tesoro movesx into its new headquarters onthe city’sx far North Side this summer, it will come out of five multitenanft office properties in which it had been leasingf space — to the tune of roughly 250,000 square feet.
Thanks to the Whataburger the amount of space that is slated to come back into the markeftafter Tesoro’s move has now been reduced by 140,00o0 square feet, Gatley notes. “People are stilk interested, they are still comingt to San Antonio,” she adds.