San Antonio Office Investment Forecast
Prevalence of Back-Office Operations Aids Class B/C Vacancy and Keeps Buyers Active in North Submarkets
Variance in office segments' rebound timelines emerges. San Antonio has long been a metro of choice for companies wanting to house back-office operations like administration and customer service personnel. The market is attractive to these types of office users due to lower rents than nearby Austin and coastal markets, while also offering a large resident pool to select workers from. Most often, firms prefer low-to-mid-tier spaces for back-office functions as costs are the main consideration. This has translated to a level of stability in the Class B/C segment during the pandemic, as well as a comparatively faster rebound relative to the Class A sector. Late last year, availability for Class B/C offices was just over 100 basis points above the 2019 log and average asking rents grew on an annual basis. Conversely, the Class A vacancy rate was more than 500 basis points higher than the pre-pandemic recording, leading to an ease in asking rents last year. On a positive note, less than 150,000 square feet of upper-tier space is expected to finalize in 2022. As such, the recovery should not be further hampered by supply-side pressure.