Published: San Antonio Express-News
By: Valentino Lucio
Date: February 23, 2011

2010 saw 97% rise after hard '09; more growth expected.

Commercial property sales in San Antonio almost doubled from 2009 to 2010, and industry insiders expect the positive growth to continue. But the city's northern growth is stifling the development of downtown's commercial stock.

A recent report from LoopNet Inc., a commercial real estate listing service, shows that total sales for the San Antonio commercial real estate market jumped from $371 million in 2009 to $732 million a year later, a 97 percent increase.

After the commercial real estate market hit rock bottom in 2009, optimism now is leading the charge toward recovery, said Hank Pruitt of Pruitt Realty.

“In 2009, there was a lot of reluctance,” he said. “Activity brings the confidence, and, going forward, I fully expect demand to take care of the supply.”

Last year, the fourth quarter was the most successful for commercial real estate compared with the other quarters that year. From the third quarter to the fourth, sales jumped 8 percent to $310 million, nearly matching sales for all of 2009.

“People are feeling better about the economy coming back,” said Jack Duke, president of DH Realty Partners. “What it boils down to is a positive, healthy attitude about the outlook of the near future.”

Retail space jumped nearly 500 percent from $17 per square foot in 2009 to $99 per square foot the next year. And total sales for office space also climbed, from $53 million in 2009 to $256 million in 2010. Industrial and multi-family properties also saw better numbers during that time.

Most of the activity Duke saw last year was in northern San Antonio, along the U.S. 281 and Interstate 10 corridors, at Culebra and Loop 1604, and near the Schertz area. He attributes the boom in sales to more residents moving to those areas.

But the migration north is hurting the downtown market. Duke said most businesses and offices tend to locate close to where their employees live. And with a lack of parking and dated stock, it might be a long time before downtown sees a major boom.

“Downtown has really taken a hit, and it doesn't look like it will get better in the foreseeable future,” Duke said. “At some point, I guess, if enough people live downtown, it might reverse the direction. But that's not going to happen anytime soon.”

Terri Rubiola, a vice president at DH Realty Partners, said the downtown office market has really suffered since the AT&T Inc. corporate offices moved to Dallas in 2008. For example, the office market downtown accounted for $21 million worth of sales in 2010, a fraction of the $256 million the entire submarket totaled.

“We still have core businesses downtown,” Rubiola said, referring to companies such as Frost Bank and H-E-B. “But we're getting fewer calls for office space than anything else.”

Despite the bad news for downtown, Duke doesn't allow it to overshadow how much better commercial real estate is doing as a whole.

“We're past the bottom and we're definitely on the climb,” he said. “This year will be better than 2010, and I expect in 2012 to see a substantial improvement.”