San Antonio Q3 Office: Frost Tower Opens, Drives Positive Absorption

The main news from San Antonio during the third quarter was the opening of the long-awaited 460,000-square-foot Frost Tower in the CBD. The resulting relocation of tenants moving out of owner-occupied buildings and into the new tower at 111 W. Houston was the main reason for positive absorption, something on which three full-service commercial real estate firms could agree.

“With the top-dollar renovations, company relocations and new Class A buildings being constructed, office tenants want to be where there’s a lot of activity, and a mixed-use atmosphere that attracts young professionals, and are willing to pay higher rental rates,” noted the NAI Partners’ report.

Speaking of higher rental rates, the reports weren’t in too much agreement; CBRE noted that asking rates have reached a new high, while JLL indicated that “average rental rates for the market saw a slight setback.” NAI Partners’ analysts agreed, pointing to rental rates showing a “slight reduction.” Still, the JLL report did go on to suggest that Class A rates in the CBD did jump, while “pre-leasing activity in these new Class A-plus development projects continues to look strong.”

In terms of outlook, the CBRE analysts indicated that the demographics are changing, with more residents flocking to downtown San Antonio, with higher, and more disposable income. “Along with the Class A office projects,” the analysts commented, “luxury residences and mixed-use projects are being developed with strong pre-leasing levels, prior to completion.

Meanwhile, the JLL experts point out that, with more Class A buildings coming online, larger blocks of “pre-leased space (will be) absorbed in the coming quarters.”