MARKET REPORT: San Antonio Projects Rent Growth of 2 Percent Annually through 2012

Source: Hendricks & Partners

San Antonio—San Antonio’s stable economy has made it an exciting market for investment, says Christopher Ross, senior investment advisor, in Hendricks & Partners’ San Antonio office.

“It doesn’t have the peaks and valleys—big fluctuations—that Austin [for example] does,” he tells MHN. “We jokingly just refer to it as ‘Slow Antonio.’ It’s generally always positive.

“There’s not a lot for sale and when deals do come up, it’s pretty competitive on the buy side,” he adds. “Our economy and overall infrastructure is probably one of the shining stars in the state.”

Because of this, however, he points out that there is not a tremendous amount of product on the market at this point. “We have 10 times the buyers than we do product right now,” he notes. The market isn’t only seeing its traditional players, says Ross; in fact, it is seeing “a lot more East Coast money than we used to.”

Cap rates range from the mid-6s for Class A assets to mid-7s for Class B product. Cap rates for Class C assets are all over the board, says Ross.

Source: Hendricks & Partners

Concessions are burning off throughout the market, and rent growth ranges from 2.5 percent to 8 percent, depending on the submarket. The strongest rent growth appears to be on the north side.

Hendricks & Partners’ San Antonio 2010 Review projects that average apartment rents in the San Antonio metro area will increase 2 percent annually through 2012.

Approximately 3,000 units have been started in the past year, which is something the market needs, according to Ross. According to the Hendricks & Partners report, only about 1,400 units are slated for delivery by the end of 2012, however.

Citywide occupancy is about 92 percent—though according to Hendricks & Partners’ report, it is projected to fall to 5.7 percent in 2011. The strongest markets in terms of occupancy for Class C product appear to be in some of the so-called bedroom communities, such as Boerne and New Braunfels. Strong Class B occupancy, meanwhile, is mostly focused on the north side of the market.

For the near term, San Antonio continues to be an attractive market for call centers, says Ross. And, of course, the 2005 BRAC (Base Realignment and Closure) activity will be huge, as it is expected to add 15,000 jobs over the long-term. (According to Hendricks & Partners’ report, it is expected to add 5,000 new military jobs in 2011, in addition to $2.1 billion in new military construction that will add 45,000 jobs in local construction.)