Low Occupancy, Lagging Rate Growth in Apartments Likely to Persist through 2025

Staggering rates of new apartment unit deliveries in San Antonio are hammering occupancy and rental prices, a trend likely to endure through 2025.

A Surge in Apartment Deliveries

Since the onset of the year, San Antonio has seen a substantial delivery of about 9,000 apartment units. This information comes courtesy of MRI ApartmentData, a firm specializing in tracking multifamily statistics within the Sun Belt.

Bruce Mcclenny, an industry principal with MRI ApartmentData, anticipates a further delivery of another 6,000 units before the year ends. Although this may not set a record given the construction booms of the 1970s and 1980s, it undeniably surpasses any numbers recorded for the Alamo City by MRI since they commenced tracking apartment unit growth.

Slow Absorption of New Deliveries

“We’re likely going to deliver way more apartment units than we’re going to be able to absorb this year,” Mcclenny remarked. As there is a current slowdown in new construction, Mcclenny suggests around 8,000 new deliveries for next year and potentially fewer in 2026.

However, the absorption rate of these new units has been sluggish, leading to a drop in occupancy rates. The subpar occupancy has further led to a yearly decrease in rental rates. Despite a momentary rally during the summer move-in season, Mcclenny anticipates a 1% drop in yearly rates for this year. He forecasts about 3% growth in 2025 as apartment unit deliveries taper off.

Looking Ahead

The current trend hints at a saturation of the market through an over-supply of apartment units. While the available units increase, their absorption has become a daunting task, causing a slip in occupancy rates and rental rate growth. As units continue to increase, and absorption rates continue to lag, San Antonio’s apartment market faces a challenging road ahead.

In the coming years, changes and adaptations in the apartment market will be required to handle these dynamics and allow the anticipated growth. This issue affects renters, housing developers, and city planners alike and demands their collective attention to ensure a balanced and thriving housing market in San Antonio in the future.