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San Antonio

Although many people from across the nation look at San Antonio as the recipient of a great deal of new growth as a result of NAFTA, the continued growth of the Alamo City is based on a diversification of the economic picture.

Every sector of the real estate industry is continuing to grow -- everything from land sales to single family residential developments. Commercial real estate brokers and developers see all facets of real estate continuing to grow at a rapid pace, with the possible exception of multifamily, which may reach a saturation point some time in the near future.

Telecommunications continues to play a big part as more national companies are moving into the San Antonio area. Two major factors influence this growth: the central time zone and the availability of bilingual employees. The expansion of West Telemarketing, one of the city's largest telecommunications corporations, exemplifies this growth. The company purchased an additional 80,000 sq. ft. building in Woodway Office Park, adjacent to its current 120,000 sq. ft. facilities. The firm employs more than 2,700 people.

The spec warehouse and distribution building continues and Darren Casey, president of Baxter Southwest, reports that his company, Darren Casey Interests, is building a new 80,000 sq. ft. office building that is anchored by Allstate. "It is unique because it is the first of its kind in more than 10 years," Casey says.

"The office market in San Antonio continues to show improvement," says Bryce Miller of Trammell Crow Co. "The vacancy rate dropped from 17.2% at the end of 1993 to 15.5% at year end 1994. Unlike many other cities, however, the strongest submarket in the city is the CBD with 2 million sq. ft. of Class-A space available. The vacancy rate was 7.1% at the end of last year."

There was a net absorption of office space in the 160,000 sq. ft. range last year, according to Blake Bonner of The Bonner Group. "Blocks of large contiguous space are hard to find and therefore lease rates are trending upward."

Bonner reports rates in the CBD at $14 to $16 per sq. ft. and suburban rates in the $14 range. Office building purchases were made by both American and foreign investors, not by institutional buyers, says Bonner.

In terms of new office construction, he says that Concord has announced its intention to build a 100,000 sq. ft. building at Concord Plaza. Also, there was talk of a mixed-use development, including some office, in the Lincoln Heights area.

Always the last to go, land has been selling at a rapid pace, according to Casey. He reports that Baxter Southwest sold more than $25 million in land during 1994.

Industrial construction continues

Security Capital Industrial Trust has been in the industrial market for two years and at first acquired 2.5 million sq. ft. of "very good industrial buildings," says Ron Mills, Security Capital's market officer for Central Texas.

"We came into the market and focused on the submarkets with which we felt the most comfortable -- the area along Interstate 35 north, toward Austin," Mills says. "We now have a total of 3 million sq. ft. of space and have identified all the buildings we want to own."

However, Security Capital is continuing to build. Mills notes that the company has three buildings consisting of 262,000 sq. ft. and they are 70% leased before completion.

Security Capital builds "multitenant buildings so they will be flexible for future tenants," Mills continues. "We now have two buildings under construction in Perrin Creek Corporate Center, a 50-acre business park in which we bought land, and we have options for the remainder of the land in the park." He also notes that his company has plans for two more buildings totaling 152,000 sq. ft. in Coliseum Distribution Center.

"We have a critical mass of more than 200 tenants and the majority of what we are continuing to build is to accommodate existing tenants," he says.

Mark Cavender, president of Crow-Barshop Properties, says that industrial space is very tight. "We are tracking 14.5 million sq. ft. of investor grade multitenant service see center and distribution space and find a current occupancy rate of 91.5%. There is a great shortage of any space larger than 40,000 sq. ft."

Cavender notes that one of the reasons for the increase in service center occupancy is that a number of companies moved into midrise office space several years ago when lease rates were low. Now that those rates are on the rise, the companies are opting to find service center space again. "And lease rates on that type of office space are definitely on the rise," he says.

Colglaizer Properties' John Durbin reports that a number of new motels were building along the city's major interstate highways -- Interstate 10 and 1-35.

"Tourism continues to be a major player in the economics of San Antonio, pulling in approximately 12 million visitors annually," says Mario Hernandez, president of the San Antonio Economic Development Foundation. "The River Walk -- the state's number one visitor attraction -- will see even more business this year with the addition of Hard Rock Cafe, Planet Hollywood and Fat Tuesday's. We also benefit from two major theme parks, Fiesta Texas and Sea World."

Retail benefits from tourists

Retail is the real estate sector most impacted by the favorable economic picture and the tourists. "We are now involved with 1.6 million sq. ft. of retail management and the occupancy rate currently stands at 92%," says Bob Barnes, managing director of Trammell Crow Co.

Barnes also announces the redevelopment of the Alamo Cement Co. quarry at Highway 281 and Basse Road, between Loop 410 and the CBD. "Trammell Crow Co. is developing the site with Bitter Blue Inc. and Alamo Cement Co. It will be a 530,000 sq. ft. complex anchored by entertainment and specialty retail tenants," he says.

Alamo Cement Co. has been responsible for a number of San Antonio's most intriguing sights. Its first quarry was developed into the Japanese Sunken Garden at Breckinridge Park in die 1930s. Fiesta Texas is located in another of its abandoned quarries and a golf course occupies another.

In a retail report from The Weitzman Group, San Antonio has a total of more than 28.1 million sq. ft. of retail space throughout the city. Currently the vacancy rate is 15.03%, or more than 4.2 million sq. ft., and the average lease rate on all properties stands at $8.32 per sq. ft.

One of the largest multifamily developers in San Antonio is The Embrey Group. "We have just completed Indian Hollow, a 336-unit project which is already 80% leased. We have another, Ventana Apartments at 1-10 and Huebner under construction," says Lisa Nichols, vice president of development. "The Ventana has 390 units and is built with what we call the Fredericksburg Look' and garages in the building. About one-third of that complex is already leased." Nichols notes that some innovations are being included in all of its complexes.

Two more complexes are planned, says Nichols. One is in Lincoln Heights, near die Quarry Golf Course, and will be an upscale, 146-unit complex with an average unit size of 1,405 sq. ft.

The other planned apartment community will be Silver Rock on Bandera Road. "This 328-unit complex will be more moderately priced -- about $0.77 per sq. ft. -- but we will keep all the security amenities," Nichols says.

Some new companies that have moved into the San Antonio area recently are: Indianapolis-based Brylane L.P. which is opening an inbound telemarketing center in Universal City; Initiatives, a manufacturer and distributor of private label women's clothing, which will locate its distribution facility in the city; Reyes Industries, a textile manufacturer which is moving from Laredo; and two financial firms, World Savings, which is consolidating its California and Colorado processing departments in San Antonio, and Kraft General Foods, which is locating its financial service center in the city.

Kay Tiller is a Richardson, Texas-based writer who contributes frequently to Southwest Real Estate News

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