A bustling scene of apartment construction in San Antonio, showcasing the city's growth.
San Antonio is experiencing a significant increase in apartment construction, with over 12,000 units developed in 2024, almost double the usual amount. However, the office sector is struggling, revealing a rising vacancy rate of 17.5%. With vacancies in retail and industrial markets also present, landlords are attempting to attract tenants through incentives. The rental landscape is shifting, with falling rents and an occupancy rate of 86.2%. As the city prepares for more apartment units in the coming years, renters may benefit from favorable conditions.
San Antonio is buzzing with construction activity, especially when it comes to apartment buildings. If you look around, you might notice that developers have finished building a whopping 12,858 apartments in 2024 alone. This number is almost double the usual amount of around 5,000 to 6,000 units that we typically see in a year. It’s quite a sight, isn’t it?
But hold on! This isn’t entirely sunshine and roses. While the apartment scene is lively, there’s a bit of a cloud hanging over the office sector. The vacancy rate for office buildings hit 17.5% by the end of 2024, which is a 0.4% increase compared to the previous year. Downtown is feeling this pinch the hardest, as many office spaces sit empty.
Meanwhile, the retail scene doesn’t seem to be lacking either, although it has seen a slight rise in vacancies. As of the end of 2024, the retail vacancy rate stands at 4%, an increase of about 0.8% since 2023. Landlords, eager to attract tenants, are getting creative; they are offering incentives like one or even two months of free rent and waiving application fees. That’s what we call a sweet deal!
So, why all this construction, and why the iron grip of vacancy? Well, many landlords are now adopting a strategy dubbed “heads-in-beds.” This approach focuses on keeping tenants happy after they move in, which is crucial in a market flooded with options. Interestingly, many properties offering these major concessions are located in the suburbs, which might just suggest renters are looking for something a bit more spacious.
According to CoStar, we can expect another 5,602 apartments to come our way in 2025, tapering down to 2,570 in 2026. However, the rental landscape is shifting a bit. After a climb in prices of 10.4% in 2021 and 3.4% in 2022, average asking rents fell by 2.3% in 2024 and 1.1% in 2023. It looks like renters finally have the upper hand.
Let’s take a step back and think about how San Antonio is holding up compared to other cities. Considering the office sector, things are looking a tad brighter here than in other major U.S. cities, which are grappling with vacancy rates soaring into the mid-20s or even 30%. The current state here is greatly impacted by a scarcity of major companies and new developments on the horizon.
Currently, there’s 434,000 square feet of office space under construction, which represents a mere 0.6% increase in the city’s inventory. Most jobs in essential sectors like tourism, military, healthcare, education, and manufacturing can’t be done remotely. This continuity might soon push some companies to bring teams back to the office, as seen with JBMorgan Chase’s latest decision.
The retail sector seems to be doing well too, with a healthy vacancy rate of 4%. Large retail spaces, however, struggle a bit, showing a vacancy rate of 22.4% for properties over 20,000 square feet. It seems those larger spaces are taking longer to fill.
As for industrial properties, they are sitting at a vacancy rate of 8.8%, up by 1.6% from 2023, indicating a neutral market. A staggering 5.3 million square feet of industrial space is under construction, though a hitch in future projects is expected.
Lastly, the apartment occupancy rate in San Antonio currently stands at 86.2%, the second-lowest in Texas, trailing only behind Austin at 84.5%. Factors like high rental rates and increased fees are likely contributing to this decline. The San Antonio Apartment Association points to economic challenges, such as soaring insurance costs and rising property taxes, driving occupancy down.
In conclusion, while the construction of new apartments places San Antonio at 15th in overall apartment construction nationwide, it remains crucial for renters to stay informed and capitalize on this unique market where better terms and lower rents are more attainable. With around 12,300 units still in the pipeline, it seems the future will definitely bring more options for savvy renters looking for their next home!
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