Huffman Developments investing millions in San Antonio's med-office market

Posted Friday, July 08, 2011

The health of the city’s medical industry is prompting another multimillion-dollar project by locally based Huffman Developments.

The firm plans to break ground later this year on a two-story, 30,000-square-foot office-condominum building, according to Steve Huffman, president of Huffman Developments. The building will be located along Hardy Oak and Sonterra boulevards on the city’s far North Side.

The target user for the building will be the health care practices and related businesses that have continued to flock to this side of the city — thanks, in large part, to the existence of acute-care centers like North Central Baptist Hospital, the Spine Hospital of South Texas and the Stone Oak Methodist Hospital.

Huffman puts development costs of the building between $8 million and $9 million.

Even though the office-condo market has cooled off considerably in San Antonio over the past two years, Huffman Developments has bucked that trend because of its focus on medical-office users and its knack for finding good locations near the city’s leading medical hubs.

The new building marks the 17th and final structure in a master-planned development known as the Villages on Sonterra — an office-condo community spanning 15 acres at Hardy Oak and Sonterra.

Huffman Development is also marketing the last 4,600 square feet in another office-condo community — the Villages on Huebner, which spans 17 acres of land along the northeast corner of Valley Green and Huebner Road in Northwest San Antonio.

Like the Sonterra community, the Villages on Huebner has been able to capitalize on its proximity to a leading medical hub — in this case, the South Texas Medical Center. And like Sonterra, the office users in the Villages on Huebner own, rather than lease their space — which is what makes them office-condominium developments.

With both Villages near capacity, the developer is now seeking out a new site for the next Villages community, says Huffman, who adds that his firm is scouting several tracts in the Alamo City — including more land around the South Texas Medical Center.

The demand for another campus certainly exists, says Huffman, who has succeeded in bringing the first two Villages to completion despite a dour economy that has brought much development to a halt.

Counting the new building under way, the Villages at Sonterra ultimately will encompass 190,000 square feet of office space, and represents a $55 million investment on the part of Huffman Development.

Meanwhile, The Villages at Huebner development consists of roughly 60,000 square feet of space, spread out over a total of seven buildings. The community also is home to the Foundation Surgical Hospital of San Antonio. The final development cost for that community: around $35 million.

Huffman expects that his new medical-office campus will be similar in scope to the Villages on Sonterra. Phase one, he says, will include two buildings of 10,000 square feet each. He puts development costs for this next campus at $24 million.

Target market

Huffman started his first two Villages about 10 years ago. Over the next several years, both would be part of a larger real estate boom that would result in several new office projects — including a slate of office condos that found favor among users wanting to build equity in their real estate.

Huffman continued to forge ahead even after the boom subsided — banking on the demand for medical space, and his firm’s ability to bring a unique product to the market.

Unlike the high-rise medical offices that have been the norm in the Alamo City, the Villages consists of several smaller buildings — most of them single story, and ranging in size from 5,000 to 10,000 square feet. With parking ratios at about five spaces per 1,000 square feet, the set-up for both Villages allows patients to drive right up to their doctor’s door.

“When you’re not feeling good, the last thing you want to do is have to park and walk a long way,” Huffman adds.

Huffman Development has also taken great pains to deliver a top-of-the-line product. Each of the office properties look more like homes than office spaces. High-end features like hardwood floors, granite countertops and 10-foot ceilings are the norm in both Villages.

These features do come at a cost, says Huffman, who puts the price of a space in the Villages at around $100 per square foot.

What owners get for that price, however, is an environment that is both soothing for patients and employees alike, Huffman adds.

Amenities aside, however, both Steve Huffman, and his son, Shawn, who serves as vice president of marketing for the company, recognize that it has been Huffman Developments’ ability to find sites in proximity to the city’s leading medical hubs that has accounted for much of the success of the Villages.

“We started conservatively,” recalls Steve Huffman. “But we knew the demand was there.”

Even as other commercial real estate sectors struggle to gain ground, San Antonio’s medical market is still going strong, say insiders like Kim Gatley, senior vice president and director of research for NAI REOC San Antonio.

“All of the cranes you see on the skyline today, (most) of it is for medically related activity,” she says. “Our medical industry is still supporting that growth.”

San Antonio Business Journal - by Tricia Lynn Silva

Date: Friday, July 8, 2011, 5:00am CDT