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Market Report

San Antonio Office Investment Forecast

2020 Outlook

Influx of New Supply Weighs on Market Fundamentals; Investor Sentiment Remains High as Rent Climbs

Sizable speculative construction drives rising vacancy. Development will surpass 1 million square feet of new space for the second consecutive year. This jump in supply includes roughly 425,000 square feet of speculative space, which will test market fundamentals and ultimately lift vacancy again in 2020. One of the largest speculative developments is The Soto, a 140,000-square-foot project located in the CBD. Both developers and tenants have shown renewed interest in the core recently, highlighted by the completion of the Frost Tower, the first high-rise office space delivered downtown in over 30 years. Additionally, Credit Human will be moving into a 210,000-square-foot space nearby in the Pearl District. Although the metrowide vacancy rate will inch up this year, it will remain more than 100 basis points below the national level. Tight conditions are powered by companies choosing San Antonio to house back-office operations and call centers. These tenants are drawn by the affordability of space relative to other Texas markets and the sizable labor pool. Competition among these firms will sustain the upward trajectory of the average rent in 2020.

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