While there was an increase in the vacancy rate, Todd Gold, president of REOC Partners, says "the fact that the office market held fast in the fourth quarter indicates the worst may be over."
Negative absorption was 276,000 sf for the year, but it slowed to 21,000 sf in the fourth quarter. The CBD posted negative absorption of 336,753 sf in 2001, with that area's class B buildings accounting for 300,416 sf of the total.
While the suburban market had positive absorption of 60,717 sf, that was less than 10% of 2000's positive absorption totaling 644,628 sf. In the fourth quarter, non-CBD absorption was 132,916 sf, up from the 2000 fourth quarter number of 57,622 sf.
Leasing deals for more than 400,000 sf were done in the fourth quarter, bringing the 2001 total to 1.3 million sf. That number, however, doesn't measure up to 2000 in two ways. First, leases for 2.5 million sf were signed in 2000 and, second, much of the 2000 leasing activity went into expansions and relocations to San Antonio. Most of the 2001 leases, on the other hand, came from tenants moving between properties.
New and converted buildings brought more than 405,000 sf to the market in 2001. New buildings included McCombs Plaza, the KellyUSA Office Center, North Park Corporate Center and the Commons and Concord Park. Cinema Plaza was converted to office space from a movie theater. The new space was 58% occupied, including a 74% pre-leasing of McCombs Plaza.
The report says there's little speculative building under way because financing has dried up. Darren Casey Interests is nearing completion of its 40,000-sf Parkway Plaza 6 and dirt is to fly soon on Koontz McCombs' 67,000-sf Two Twin Oaks building, where Allstate Insurance has signed for 50,000 sf.
San Antonio isn't carrying the load of vacant sublease space like other Texas cities. San Antonio has 700,000 sf of available sublease space while Dallas-Fort Worth had eight million sf in the third quarter; Houston, 3.5 million sf; and Austin, 2.4 million sf. Still, the REOC report, says the San Antonio sublease space is enough to keep absorption rates down and rental rates in check.
The survey, prepared by Kim Gatley, director of market research in REOC's San Antonio office, was based on multi-tenant office buildings, 20,000 sf and larger. It also excluded owner-occupied, single-tenant, government and medical buildings.
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