SAN ANTONIO—As with most goods and services in a free market economy, the supply and demand for office space can greatly shape the overall strength of the office market in San Antonio. In NAI Partners' latest Data Insight, the firm examines current and historical changes in the supply and demand of office space in the San Antonio market, and how those variables shaped levels of vacancy.

New deliveries and strong absorption in 2006 and 2007 led vacancy to decrease from 15.4% to 12.5%. However, as new deliveries continued and demand diminished, vacancies increased from 13% in 2008 to 17.7% in 2012. Since 2012, the supply of new deliveries has remained modest and relatively constant, between 400,000 and 600,000 square feet per year. Meanwhile, recent demand from 2013 to 2015 has been increasing from lows of only 179,000 square feet of positive net absorption in 2011 and negative net absorption of -323,000 square feet in 2012.

In fact, current indications are that 2016 will close out the year with exceedingly strong net absorption of more than 1.5 million square feet. Additionally, as a result of the tightening between supply and demand, it is reasonable to expect rents to begin increasing, particularly if vacancies continue the steady downward roll.

“With steady supply and increasing demand, San Antonio's office market has seen its vacancies decline from 17% in 2012 and 2013 to the current level of 13.2% at the end of 2016,” J. Nathaniel Holland, chief research and data scientist, NAI Partners, tells GlobeSt.com. ”If demand continues to increase and vacancies continue to fall, then San Antonio's office market will quickly transition to higher rents, representing an opportunity city ready for new construction.”

Supply is measured in terms of the square feet of rentable building area of stock inventory and new deliveries. The metric for demand is net absorption, which is also measured in terms of square feet of rentable building area. In turn, vacancy is a collective metric of supply and demand, measuring empty office space on the market in square feet of rentable building area, whether or not that space is leased or for rent.

As previously reported, NAI Data Insights from October indicated there was a 35% gap between sublease and direct base asking rents for class-A buildings in Houston.

Instant Insights /

Supply and Demand Shape Vacancy of Office Market

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