The San Antonio commercial real estate market isn’t all bad news: it’s just that banks are still being stingy when it comes to commercial loans.

In fact, most of the lending in San Antonio’s commercial sector is coming from the refinancing of existing debt; not for the construction of new projects.

So, how do we break out of the cycle that left the commercial real estate market in San Antonio at a veritable stand still in 2009?

How to Break the Cycle

First of all, the lenders must begin to ease off the tough restrictions, thereby enabling builders and developers to obtain financing. Lenders must also be willing to put up a larger percentage and demand more realistic returns.

Members of the 2009 Community Development Summit, which was recently hosted by the city of San Antonio and the San Antonio chapter of the Urban Land Institute at the Convention Center, also agreed that these topics were huge roadblocks for San Antonio commercial real estate development.

San Antonio still comes out Ahead

Perhaps one of the positive aspects about San Antonio is that this dynamic city was spared much of the fallout from the nationwide credit crisis and housing market collapse. From positive job growth to steady rents, the commercial real estate market in San Antonio enjoys a more robust economy than other large cities throughout the country.

Today’s tough lending practices have resulted in lenders now rarely willing to put up more than 70 percent of the money needed to finance a commercial project. In contrast, lenders used to be more than willing to front as much as 90 percent for a commercial project in San Antonio.

Waiting for a Rebound

It is important to understand that the commercial real estate industry in San Antonio is poised for a rebound, as the residential real estate market is currently experiencing positive signs of growth and the commercial industry generally lags about 10 to 18 months behind.

Although retailers are finding it difficult to secure financing, this sector of the economy is still seeing deals take place. However, retailers have been getting a bit more creative because of the tight lending sector. It is common, for example, to see retailers building smaller stores and retail developments being built smaller. A good example of a smaller retail development is Quarry Village, which first opened its doors in October 2008.

Real estate construction projects have slowed down quite a bit, and there’s a perfectly good reason why; builders and developers are simply trying to fill up the space that they have already built.

Which means that office and retail space in San Antonio is both abundant and reasonable.

For leasers, this may be a prime opportunity to snag a great office space lease, and for developers, it may be a time to get businesses into their spaces.

Although the San Antonio commercial real estate market is strong, particularly when compared to other areas of the country, many developers are nonetheless looking forward to getting construction up and running once again; and to do that, they must first lease the vacant space they already possess.

Building Remains Stagnant, Leases in the Limelight

Currently, many office space developers are negotiating new leases with their clients instead of looking for more construction opportunities. And, considering that San Antonio continues to thrive in terms of new residents – 26,000 new residents moved into San Antonio from July 2007 to July 2008 alone – developers and builders of both retail and office space can look forward to continued activity.

The San Antonio commercial real estate market, according to most industry analysts, will remain rather flat during the second half of 2009, although 2010 is expected to bring a new influx of commercial activity.

Builders and developers, in the meantime, will play it safe by attracting new tenants into their commercial spaces.  Office vacancies reached 19.1 percent in the first quarter of 2009, while retail vacancies hovered around 13.8 percent during that same period.

Because of San Antonio’s influx of commercial space, many business owners looking to lease space in San Antonio may be even more encouraged to make the move.

Buying and selling commercial property is still at a stand-still, and will likely remain that way for the remainder of 2009, but for those interested in leasing commercial space, now may be the time to make a move.

Northwest San Antonio has begun showing signs of stability, and Wereldhave, a Netherlands-based development firm, is one of the first to notice – and to take action.

This development firm has plans to bring a high-end, mixed-use community to San Antonio, and the first part of the project is expected to debut as early as this fall.

Two Class-A Office Buildings on the Horizon

The master-planned community envisioned by Wereldhave will have two, Class A office buildings, thereby boosting the sagging office market here in San Antonio. The office buildings will be a part of their master-planned project entitled “eilan.”

The mixed-use community will measure a whopping 220,000 square feet and will cover about 118 acres, once completed.

The first of the two office buildings is due to be completed this September, with the second one expected to open just one month later.

Wereldhave recently hosted a “topping out” ceremony for the two, newest office buildings, which is essentially a tradition that marks the completion of a structure’s framework.

Looking Ahead

Giving the local office market economy a boost, leasing has begun already for both of the office buildings.

Eilan will be located along the northeast quadrant of Loop 1604 and La Cantera Boulevard, which is just a short distance away from Interstate Highway 10.

Once completed, the development will include nearly 1.8 million square feet of space, including office, retail and residential development. The project is expected to top $300 million.

Confidence Remains

Brian Harris, senior vice president of Wereldhave, notes that the project is completely funded through the company. He states that they have confidence that the office market in San Antonio is on a path to recovery, and the office market is still in relatively good shape, all things considered.

Many real estate experts note that, although the vacancy rate for office space in San Antonio is up quite a bit, Class A office buildings in the local market are relatively scarce, denoting a need for this type of space in the market.

The downturn in the national economy has forced many businesses to close offices or to downsize current operations. Even the San Antonio office space market has felt the pinch and has lost a few major players in the commercial sector.

Luckily, there have been other businesses ready and willing to step in and take over much of this vacated office space. Some of the largest office buildings occupied by corporate giants such as AT&T have seamlessly transitioned to new lease holders who are drawn to San Antonio’s economic stability.

Office Rentals Drop a Class

There are four classes of office space available to lease:

• Class A – Situated in the best locations, these offices offer quality and prestige. Many come with great amenities. These office spaces generate the most money per square foot in leases.
• Class B – These buildings may be second-generation leases, or may not quite offer the amenities or location to demand the highest rents.
• Class C – Visually acceptable buildings with few to no amenities, located in less prestigious areas.
• Class D – Normally in poor physical condition and located in the least desirable locations.

Recent trends in the San Antonio office space market show that leases in new construction are slowing, while second generation leases are becoming more popular. These allow tenants to lease in prime locations and maintain their image at lower costs.

San Antonio’s Successes Gain National Attention

While many companies slash jobs and close offices in other parts of the country, many businesses in San Antonio continue to grow. USAA’s announcement that it will expand operations in San Antonio is a boon to the local economy. New jobs will bring more residents and, along with them, and increased need for services. Such activity will fuel both the San Antonio office space markets and the housing market.

Some analysts are expecting San Antonio to see more of this type of growth through 2009 and beyond as the city gains increasing national attention for its stable economy and lower than average unemployment rates. Before, many corporations would overlook San Antonio for expansion. Now, they are now looking to the Alamo City as a feasible possibility. A low cost of living means a better opportunity for businesses in San Antonio to remain profitable, and for their employees to enjoy a high quality of life.

San Antonio is a city rich in culture, history and excitement. The city’s diverse workforce and low tax burden has long made it a hot spot for commercial activity. It is therefore no wonder that the commercial real estate market has reaped the rewards of a strong, healthy economy.

There are many factors that come into play when speaking of an area’s strong, local economy.  From its cost of living to its location and its housing market, a city can not experience a strong commercial sector – and therefore a strong commercial real estate market – if residents, businesses and corporations aren’t drawn there.

It’s no wonder, then, why San Antonio has a thriving commercial sector.

The following list details the top 10 reasons why San Antonio supplies the perfect ingredients for a healthy commercial real estate market:

1. Port San Antonio, its numerous tax advantages and its Foreign Trade Zone designation
2. Ideal location between Florida and California and Canada and Mexico
3. Close proximity to Latin America countries
4. One of the most affordable and strongest housing markets in the United States (which attracts a healthy workforce)
5. A healthy population growth (15 percent over the last, few years)
6. Low cost of living and year-round, warm temperatures
7. Home to numerous, major corporate headquarters, including Valero Energy Corporation, Clear Channel Communications, Tesoro Petroleum Company, Kinetic Concepts and NuStar Energy LP
8. The presence of major, national and international companies, including Toyota Motor Manufacturing, Microsoft, Washington Mutual Financial, QVC Home Shopping and Martin Marietta Materials SW
9. Education and research institutions, including Southwest Foundation for Biomedical Research, Texas Research Park, University of Texas Health Science Center, University of Texas San Antonio and Trinity University
10. Number one tourist destination in Texas

The military industry continues to be a strong force in San Antonio’s commercial real estate market.

The U.S. Army Corps of Engineers recently awarded contracts to Fort Sam Houston for the construction of two, new barracks for Army personnel who will be taking courses at the Medical Education and Training Campus.

The two contracts that were awarded by the U.S. Army Corps of Engineers total about $118.7 million, and will provide barracks for about 1,800 Army medical trainees. This last set of contracts, which are designed for the ongoing development of the Medical Education and Training Campus at Fort Sam Houston, will consist of three dormitories.

The Medical Education and Training Campus is part of the Base Realignment and Closure action, which was formed in 2005.

The construction of the barracks will be handled by Hensel Phelps Construction, a Colorado-based company that also has offices in Austin.

The barracks construction will include a dormitory unit, which will measure 366,000 square feet, as well as another 192,000-square-foot facility that will also house additional Army personnel. In total, the facilities will hold 1,800 personnel.

There are also additional dormitories, currently under construction, that will house more than 3,600 Air Force and Navy personnel, once completed. Hensel Phelps was also contracted to build these facilities, as well.

The newest construction plan is part of the Joint Program Management Office, which manages the San Antonio BRAC construction program. The program was set forth by the Fort Worth District Office of the U.S. Army Corps of Engineers.

The entire project, under the San Antonio BRAC construction program, will involve either building or renovating 78 facilities at Fort Sam Houston, totaling more than six million square feet of space. Once completed, the program is expected to exceed $2 billion.

It comes as no surprise to the residents of San Antonio, as well as the people who work here, that San Antonio is a hot spot for all things business. With a progressive, thriving economy, which has someone managed to dodge the bullet of the recession, San Antonio enjoys an excellent labor pool, a low cost of living and a superb quality of life.

In fact, San Antonio was named by Forbes as the second most recession-proof city in the United States in 2008. Just some of the factors leading to this honorable position include its strong employment and its growing industries.

Dynamic Business and Industry Continue to Drive the Region

From the military and government sectors to the manufacturing and biomedical sectors, the industries of San Antonio are a driving force behind its dynamic economy.

It certainly comes as no surprise, then, that the commercial real estate market in San Antonio is alive and well. Buoyed along by the city’s thriving industries and businesses, San Antonio has enjoyed a healthy commercial real estate market that has kept on chugging even when the national real estate market was struggling to keep its head above water.

Introducing the Four Points by Sheraton

A fine example of the changes taking place in San Antonio regarding its commercial real estate market is the Four Points by Sheraton, a prototype hotel set to open in Northwest San Antonio this year.

Sheraton has chosen San Antonio as a home for this prototype – which is, incidentally, one of only three of these prototype hotels in North America – because San Antonio has proven, time and time again, that its industries are strong and that its economy is even stronger.

The Four Points by Sheraton, which is owned by San Antonio-based Galo Properties and is managed by the DePalma Hotel Corporation, will boast 130 guest rooms and plenty of guest amenities and features.

The Four Points by Sheraton is strategically located near the Shops at La Cantera and the University of Texas at San Antonio. In addition, the Four Points will be the centerpiece of Promenade Place, a multi-use commercial area of shops, restaurants and offices.

Amongst other tanking markets around the nation, San Antonio is holding its own. Although, like many of the markets in the US, it certainly isn’t experiencing a surge in commercial real estate transactions, it also hasn’t seen sharp declines like some of the larger cities in the country.

Much of San Antonio’s steady commercial real estate market relies on its strong, local economy and growth, which has proven to be quite reliable and consistent.

In fact, according to Emily Spicer of the San Antonio Express News, San Antonio is “one of the bright spots on the tumbling housing market landscape.”

What is it about San Antonio that sets it apart from many of the other markets in the country?

1. San Antonio is the place to be for banking and medicine. Warm, year-round temperatures, along with a relatively safe geographical area in terms of natural disasters, make San Antonio a desirable part of the country.

In addition, the economy boasts banking and medicine as its top-two economies. Washington Mutual and Citicorp both have a strong presence in San Antonio. The South Texas Medical Center and 45 other medical institutions also call San Antonio home.

1. Many of the country’s top companies are based out of San Antonio. Many large corporations are lured to San Antonio because of its lower cost of living.

The economy of San Antonio is becoming more technology-based, and the area is now home to a number of major corporations, including the Toyota Tundra plant and the Valero Energy Corporation.

1. San Antonio continues to see exceptional job growth. In fact, from 2004 to 2007, San Antonio experienced an increase of 10 percent in the total number of jobs. In addition, unemployment continues to remain low.
2. Real estate prices remain very low, compared to many parts of the country, as well as other parts of Texas.

Amongst other tanking markets around the nation, San Antonio is holding its own. Although, like many of the markets in the US, it certainly isn’t experiencing a surge in commercial real estate transactions, it also hasn’t seen sharp declines like some of the larger cities in the country.

Much of San Antonio’s steady commercial real estate market relies on its strong, local economy and growth, which has proven to be quite reliable and consistent.

In fact, according to Emily Spicer of the San Antonio Express News, San Antonio is “one of the bright spots on the tumbling housing market landscape.”

What is it about San Antonio that sets it apart from many of the other markets in the country?

1. San Antonio is the place to be for banking and medicine. Warm, year-round temperatures, along with a relatively safe geographical area in terms of natural disasters, make San Antonio a desirable part of the country.

In addition, the economy boasts banking and medicine as its top-two economies. Washington Mutual and Citicorp both have a strong presence in San Antonio. The South Texas Medical Center and 45 other medical institutions also call San Antonio home.

1. Many of the country’s top companies are based out of San Antonio. Many large corporations are lured to San Antonio because of its lower cost of living.

The economy of San Antonio is becoming more technology-based, and the area is now home to a number of major corporations, including the Toyota Tundra plant and the Valero Energy Corporation.

1. San Antonio continues to see exceptional job growth. In fact, from 2004 to 2007, San Antonio experienced an increase of 10 percent in the total number of jobs. In addition, unemployment continues to remain low.
2. Real estate prices remain very low, compared to many parts of the country, as well as other parts of Texas.

San Antonio’s thriving manufacturing industry has had a positive impact on San Antonio’s overall economy and housing market.

Forbes.com recently ranked San Antonio as the nation’s second top recession-proof city, and the strong manufacturing presence in the San Antonio area, which continues to grow thanks to heavy hitters such as Toyota Motor Manufacturing and Texas Machining Enterprises putting down roots here, is one of the reasons why.

An increase in the manufacturing industry in San Antonio means more jobs. And more jobs mean a stronger economy. And a stronger economy means a healthy housing market. It’s a simple formula that San Antonio has nailed. And as long as the manufacturing industry chooses San Antonio as their home, the residents of San Antonio will continue to reap the rewards in many different ways.

San Antonio Manufacturers Association

These factors influencing San Antonio’s overall, vibrant economy are recognized and supported by the San Antonio Manufacturers Association (SAMA). Started in 1914, this organization serves as an advocate for the San Antonio manufacturing community.

It serves to “proactively monitor manufacturing-related topics and participate in local government; promote manufacturing to enhance its perception in the community; provide educational opportunities to benefit its members and their workforce; and to create forums for business to business networking opportunities.”

SAMA promotes the interests of San Antonio’s manufacturing industry, and also educates the public on the importance of consuming more goods and wares that are manufactured, prepared or produced in San Antonio.

SAMA provides education for those in the industrial and business community, as well as the general public. It also provides information vital to the manufacturing industry, such as new rules, regulations and ordinances which affect them.

SAMA members are represented in various, strategic organizations which help to plan various events, fund raisers, trade shows and seminars throughout the year.