Q4 2022 Office Space Report: San Antonio, TX
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
San Antonio’s unemployment rate dropped in Q4 2022, settling at 3.4%.
October was a strong month for San Antonio’s economy, with nearly 4,000 in-office jobs added in the span of just one month, bringing the year-to-date total to 9,600 new jobs.
Should any one sector experience reduced performance in San Antonio’s economy, its diversity across several major industries, such as healthcare, national security, and information technology, makes it resistant to a significant downturn.
Employers in San Antonio’s office space market are now implementing policies to facilitate a regular return of their employees, sparking changes throughout workspaces with employee retention as the main priority.
General Area Overview & Demographics
San Antonio, TX, is one of the largest cities in Texas and a major cultural hub. With a population of 1.5 million, San Antonio is the second-most populous city in the state and the seventh-most populous in the United States.
The city’s racial makeup is predominantly Hispanic (63%), followed by White (30%) and Black (4%). San Antonio’s median age is 34 years old, making it younger than other large cities in the U.S., such as New York City (37 years) and Los Angeles (36 years).
San Antonio boasts a diverse economy that includes industries such as defense/aerospace, biomedical sciences, finance/insurance, healthcare, information technology/software development, tourism/hospitality services, retail trade, and manufacturing.
It is home to a generally mild and pleasant climate, although it experiences its fair share of extreme weather conditions. The city’s average annual temperature is around 65°F, with summers reaching highs of 95°F and winter temperatures sometimes dropping below freezing at 31°F.
San Antonio offers an array of activities and places to explore. Some of San Antonio’s most popular attractions include the San Antonio River Walk, The Alamo, Sea World San Antonio, and San Antonio Missions National Historical Park.
San Antonio is home to several colleges and universities offering a range of degree programs, including the University of Texas San Antonio (UTSA), San Antonio College, St. Mary’s University, and Trinity University. UT San Antonio is the city’s largest university, with over 31,000 students enrolled in degree-granting programs.
Summary of San Antonio Office Space Performance in Q4 2022
With an overall stable office market in San Antonio, Q4 2022 saw healthy fundamentals across the board, such as rent growth and leasing activity also remaining steady. That said, there were some dips seen as well.
Q4 brought losses to the San Antonio office market, with occupancy down 90,000 square feet after a prior quarter of positive absorption. This brings a total loss of 790,000 square feet for the year: 63% of the occupancy losses were in Class B and C products.
What are office space rents like in San Antonio?
Average asking rental rates increased to $29.30 per square foot in Q4 2022, a nearly $0.50 increase from the previous quarter.
Class A rates reached as high as $33.70 per square foot. Class B rates reached $27.80 per square foot. The submarkets with the highest rent growth include Outlying Counties, Far Northwest, Far North Central, and Far West.
Purchase & Leasing Activity
Throughout the market, leasing activity was high, with over 810,000 square feet transacted. Notable sales and leases were made in Class B single-story properties, particularly within North Central, Northwest, and Far West submarkets.
Office building sales ended with Q4 totaling $53 million in sales. This resulted in an average of $172 per square foot for the year. It’s likely that investment sales will cool down in 2023 as economic trends create unfavorable conditions.
Notable Office Space Deals in San Antonio in Q4 2022
Several notable deals for San Antonio office space took place in Q4 2022. These include:
- Fuller Realty Partners’ acquisition of 190,000 square feet;
- Chilton Real Estate’s acquisition of 71,000 square feet; and
- Econtrols’ acquisition of 53,000 square feet.
These are among other notable sales transactions and leases for office space in San Antonio.
New Office Space Development Activity in San Antonio in Q4 2022
There were two buildings delivered this quarter, The Crossing at SOBO and Farinon Business Park III, providing an additional 117,000 square feet in total office space in San Antonio.
San Antonio’s office space currently has 13 projects in its pipeline, representing 1.8 million square feet of product to become available.
Construction industry conditions could become challenging in 2023 as financing tightens, jobs are reduced, and vacancy rates rise.
Market Forecast for San Antonio’s Office Space Market
It’s unclear what 2023 holds, with increased debt costs, loan maturities, and stricter financial oversight from banks to landlords looming.
However, San Antonio’s office market remains favorably positioned, despite the anticipation of economic headwinds. San Antonio’s population growth, declining unemployment rate, low cost of living, and nationally low rental rate, make it an attractive market for tenants and investors.
However, despite those concerns, San Antonio office space is still positioned to do well. Boasting strong population growth, a low unemployment rate, and affordability for tenants and investors alike, there are indications of a favorable market next year.
Takeaways for Office Space Investors
The San Antonio office space market had an overall good year, yet this quarter showed a few signs of cooling.
Whether this is just a temporary dip or an indication of things to come remains uncertain.
Each investor will need to do their due diligence to investigate if this highly active market is the investment move to make.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
Find Office Space in San Antonio, TX With the Help of an Experienced CRE Agent or Broker
MyEListing.com maintains one of the largest national directories of commercial real estate agents & brokers in the country. Use it for free to find an agent or broker in San Antonio, TX.
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