Quarterly Market Report

Transcription

1 OCTOBER EXECUTIVE SUMMARY San Antonio office market hits record high for rents Full-service asking rents rose by $.11 per sq. ft. quarter-over-quarter to close at $22. an all-time high with an increase of $.37 per sq. ft. year-over-year. San Antonio s overall vacancy rate was 1% ending, down 2 basis points quarter-over-quarter and year-over-year. Net absorption remained positive at 85,266 sq. ft. at quarter s end, down from 92,26 sq. ft. as of Q2, although more than double the 33,83 sq. ft. recorded at this time last year. There was no new supply delivered to the market during the third quarter while occupancy remained tight at 9%. San Antonio s leasing activity remained steady at 671,296 sq. ft., up 48, sq. ft. from the previous quarter, although down from 862, sq. ft. a year ago. The amount of space under construction ended the third quarter at 1.2 million sq. ft., including buildings that are mostly owner-occupied. Moderate economic growth in July The San Antonio economy remained steady in July. Economic indicators, such as the San Antonio Business-Cycle Index increased at a 2.5% annualized rate in July, up from June s 1.7%. Job growth increased at a.4% annualized rate over the three months through July, with health care employment rising but leisure and hospitality employment dropping. Other services and mining grew at a vigorous pace, while the remaining private services sectors were flat or lost jobs. The unemployment rate fell to 3.2% in July, significantly below the Texas rate of 4.% and the U.S. rate of 3.9%. Supply & Demand Market Indicators Net Absorption Completions Vacancy Current Prior Quarter Q2 8.% Vacancy Direct 9.8% 9.9% 1% Vacancy 1% 1.2% 1.2% Availability Direct 11.9% 12.% 12.6% Availability 12.4% 12.5% 13.2% Net Absorption 85,266 92,26 33,83 Leasing Activity 671, , , 1,155,683 1,26,97 1,268,195 Deliveries 18, ,72 Avg Asking Rent (Gross) $22. $22.24 $21.98 Inventory 58,3,415 58,3,415 57,869, % 12.% 11.% 1% 9.% Year Ago HOUSTON AUSTIN SAN ANTONIO

2 Vacancy rate drops quarter-over-quarter Net Absorption The total vacancy rate for the San Antonio office market dropped 2 basis points in the third quarter of to 1%, compared to this time last quarter and last year. vacancy in the suburban office market was also at 1%, while San Antonio s space registered at 13.1%, and lower at 9.1%. The CBD has 2.5 million sq. ft. of inventory tracked in 12 buildings with, sq. ft. of vacant space in. The full-service average asking rent for space downtown is at $31.84 per sq. ft., up $1.52 per sq. ft. from $3.32 last quarter. Thousands - San Antonio fifth-ranked in construction growth After decades of waiting, a surge of new office development is in the future for San Antonio in fact, PlanGrid, a developer of construction industry software, ranked San Antonio fifth in the nation in construction growth. The ranking is based on the city s anticipated 13% growth in projects, and an additional 9% increase in local construction employment growth this year. There is currently 1.2 million sq. ft. of space under construction in the San Antonio office market, with about 451, sq. ft., or 39% available for lease. The 462,-sq.-ft. Frost Tower at 111 W. Houston is on track and set to deliver in the first quarter of 219. When completed, the tower will be the new headquarters for Cullen/Frost Bank. The high-rise is currently 63% leased and will serve as an iconic addition to the downtown skyline of San Antonio. In addition, CPS Energy awaits the completion of its new headquarters at 52 McCullough Ave. The $15 million redevelopment will include 43, sq. ft. of office space in two towers that will be home to 1, of its employees. The towers, built around 198, previously served as offices for AT&T and as the headquarters of Valero Energy Corp. As CPS Energy prepares to move in 22, the company has put its current headquarters up for sale at 145 Navarro St. Included are a garage and office space across Navarro St.; the Tower Life garage; a parking lot on Navarro and Villita Streets; and the Villita Assembly Building on Presa and Villita Streets. It is reported that these properties add up to more than $46 million in assessed value. - - Completions Thousands Local developer trades NW office building 1. Real Capital Analytics data reports the rolling 12-month office sales volume as of August in the San Antonio area at $416. million, resulting in a -19.% change. The buyer composition in is made up of 6% private and 39% institutional. A recent significant transaction for the.5 2

3 San Antonio office market was the acquisition by Boyd Watterson Asset Management of the Trinity Building in the Brass Professional Center at 424 Woodcock Dr. for a reported $7.6 million, or $ per sq. ft. Local developer Brass sold the 66,721-sq.-ft. office building that was built in The city of San Antonio is one of the Trinity Building s anchor tenants. Leasing activity remains steady Leasing activity increased slightly during the third quarter with a total of 671, sq. ft. leased in the overall San Antonio market, an increase of 48, sq. ft. from last quarter. This is in comparison to 862, sq. ft. leased this time last year. Much of office tenancy in San Antonio is driven by the medical, military, cybersecurity, and biotech industries. Recent lease signings include Next Oncology inking an 11-year, 19,948-sq.-ft. lease in Medical Center Tower I within the Christus Santa Rosa Campus. The space will serve as a Phase 1 cancer research center and treatment practice for advanced cancer patients. Additional tenants recently moving into space include Spectrum, taking 75,672 sq. ft. at Oaks at University Business Park in the northwest submarket; WeWork opening a new location in the Kress Building in downtown taking up 64,531 sq. ft. on five floors at 315 E Houston St.; and ParkHurst NuVision, a cataract surgery center, signed a 29,-sq.-ft. lease within a two-story office building located at 9725 Datapoint Dr. in northwest San Antonio. The current leasing activity follows 18, sq. ft. of product delivered to the market in and 85,266 sq. ft. of positive net absorption ending the third quarter of. space represented 18, sq. ft. of that total, while registered -156, sq. ft. Sky-high prices for quality office space The price of San Antonio s downtown office space is climbing noticeably as demand grows, vacancy shrinks, and the development pipeline explodes. This is the result of the many investors, developers, companies, and educational institutions with a vision for the future of the Alamo City. The highest-quality space, with the best location, and ease of accessibility will yield the highest rents. The five buildings with the majority of available office space in the CBD include Frost Tower, Weston Centre, Bank of America Plaza, Rosa Verde Plaza, and Travis Park Plaza. These four existing buildings, and one under construction comprise 1.3 million sq. ft. with 25.% or 467, sq. ft. available for lease. In the third quarter of this year, the average asking full-service gross rate for space in these buildings was $34.11 per sq. ft. the highest ever in this market. San Antonio Office Cumulative Monthly Sales Volume Source: Real Capital Analytics Leasing Activity Average Full-Service Asking Rent $3 $26 $22 $18 $ J F M A M J J A S O N D Direct Sublease Direct Sublease $26.6 $22.94 $2.27 $18.62 $1 3

4 Submarket Stats Inventory Vacancy Availability Net Absorption YTD Net Absorpiton Leasing Activity Deliveries Under Asking Rent Asking Rent San Antonio Market 58,3, , , ,296 1,155, ,625, ,51 192, , , ,725, , , , , Inventory Vacancy Availability Net Absorption YTD Net Absorpiton Leasing Activity Deliveries Under Asking Rent Asking Rent CBD 7,266, ,584 63,695 98, , ,499, ,6 38,62 76, , ,455, ,524 6,4 27, North Central 15,841, ,919 27, ,21 242, ,966, ,339 16,173 16,38 174, ,299, ,218-71,76 85,169 68, Northeast 5,14, ,41 3,792 16, , , ,655-15,39 2, , ,116, ,781 8,193 12, Northwest 28,27, ,666 2,3 31, , ,988, ,166 55,926 1,594 84, ,724, ,116-83, ,68 174, South 1,933, ,936 33, 8, , ,591 7,157 4,591-1,129, ,8 15,298 3, Suburban 51,86, ,718 84, , 693, ,125, , ,217 33,61 451, ,269, , , ,54 242,

5 San Antonio Office Submarkets CBD 2. North Central 3. Northeast 4. Northwest 5. South Information and data within this report were obtained from sources deemed to be reliable. No warranty or representation is made to guarantee its accuracy. NAI Partners quarterly report for the San Antonio office market includes information and data for, and Class C buildings 2, sq. ft. and up for all office property types (including leasable medical space in office buildings). Owner-occupied buildings are excluded. OCTOBER NAI Partners San Antonio Office 12 NE Loop 41, Suite 81 San Antonio, Texas 7829 tel Leta Wauson Director of Research leta.wauson@naipartners.com tel