Taylor Dorris, CBRE
Lauren Paris, CBRE
Everyone is buzzing about the significant amount of speculative construction all over Texas. For the first time since 2008, San Antonio’s office construction is picking up the pace with 928,395 square feet of speculative development underway. Local developers with conservative land positions are taking the lead on all of these developments as they respond to an increasing need for relevant office building options for corporate firms—something San Antonio has not had since 2009, when Concord Park II, Overlook at the Rim, Plaza Las Campanas and others were delivered.
Both the Far North Central and Northwest submarkets have witnessed the bulk of recent absorption activity, offering newer, more efficient office options near the more modern residential subdivisions and retail developments. The Northwest submarket also accounts for one-third of San Antonio’s total rentable building area for office space. As of Q4 2014, the Northwest submarket absorbed 342,927 square feet, while the North Central submarket absorbed 312,856 square feet.
Two great examples of success in these submarkets are WestRidge One at La Cantera (completed in Q4 2014) and Éilan Buildings I and II (completed in Q1 2011). These two projects are responsible for 253,976 square feet of absorption in the past two years and are both 100 percent occupied.
Their location at North Loop 1604 and Interstate Highway 10 West, surrounded by the city’s most dynamic retail developments, is proving to be a major draw. Today, there are only two existing buildings in this submarket that can accommodate a square footage requirement over 8,000 square feet. Looking ahead, speculative buildings in these hotter submarkets seem to be positioned for success. In the past five years, companies considering relocating to Texas could not find state-of-the-art facilities to tour in San Antonio.
This has been a major setback since a majority of corporate users want to relocate to an existing, move-in-ready facility. Could the lack of relevant availabilities be the cause for San Antonio’s small white-collar job growth (approximately 1.5 percent over the last five years)?
Despite the muted growth in this particular sector, total employment in San Antonio has expanded by 12 percent, or 100,500 jobs since 2010, with over 30,000 of those positions created in office-using industries. Most recently, the Professional & Business Services sector, predominantly an office-using industry, led all other San Antonio industries in employment growth, expanding by over 4,500 jobs year over year through November 2014, according to the U.S. Bureau of Labor Statistics.
San Antonio has seen 25 companies expand and/or relocate into 2.1 million square feet of office space since 2010, with notable build-to-suit activity for tenants like NuStar Energy and Nationwide Insurance in 2012 and USAA’s expansion in 2014. As a result of heightened market activity, office vacancy has dropped to 15.9 percent as of year-end 2014. San Antonio is a tenant market that requires the building to be on the ground and ready for occupancy.
Historically, it has been more difficult to pre-lease a concept building in San Antonio than in other Texas markets. One compelling statistic for the San Antonio office market is this: the 3 million square feet of speculative office space developed since 2005 is approximately 90 percent occupied today.