"While reports indicate that the national office market will not regain equilibrium until 2005, the outlook for the San Antonio office market is much brighter," Todd Gold president of REOC Partners, said in releasing second quarter figures.

That's the longer term outlook for San Antonio, however. Through 2002, the outlook remains flat, REOC said.

San Antonio's quicker recovery will come because, REOC said, the city doesn't have the double whammy of new projects delivering more space to the market, nor does the amount of its vacant sublease space have as big an impact as it does in other cities.

Just one speculative project is underway with delivery scheduled later this year. That building, Two Twin Oaks, is 100% leased to Allstate Insurance and ERSI. As for the vacant sublease space, it appears to have peaked and, at 800,000 sf, is on the way down. Kimberly Gatley, REOC's director of research, said some of the sublease space has been reabsorbed.

The overall vacancy rate rose to 15% at the end of the second quarter from 12% at the end of the 2001 second quarter, according to REOC. The vacancy rate was 14% at the end of the 2002 first quarter.

The average rent stayed steady at $17.67 per sf compared year-to-year. Leases, however, are being negotiated at 5%-10% lower than asking rates.

The citywide market had a negative absorption of 205,105 sf for the first six months of 2002, compared to a negative absorption of 75,405 sf for the same period in 2001, according to REOC.

The CBD's overall vacancy rate was 15.9% at the end of the second quarter, up from 15% a year ago. The non-CBD vacancy rate rose to 14.9% from 11.5%.

Instant Insights /

REOC Predicts Brisk Rebound for San Antonio Office Market

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