San Antonio’s Building Surge Dampens Rent Growth

Despite the robust pipeline, demand in the metro has remained relatively healthy as Millennials and Baby Boomers flock there to partake in the strong economy.
San Antonio rent evolution, click to enlarge

San Antonio’s multifamily market has been somewhat of a steady tortoise in a race against the more agile Texas hares of Austin, Dallas and Houston. Despite the robust pipeline, the Alamo City manages to keep demand relatively healthy, attracting Millennials and Baby Boomers with its strong economy and creating the need for new stock, especially workforce housing. The building surge pushed down the occupancy rate in stabilized assets a mere 10 basis points in the 12 months ending in September, to 93.3 percent. Meanwhile, rent growth decelerated to 0.5 percent year-over-year.

Two sectors hold the first spot in job creation—mining, logging and construction, and education and health services—adding 6,200 jobs each. The multifamily pipeline’s more than 30,000 units and the many commercial projects around the metro, including the $200 million Hemisfair and CPS Energy’s new headquarters, will likely maintain this trend. Coworking is expanding, too—WeWork has leased five floors in the Kress Building near the Geekdom tech incubator, where it will house more than 1,000 members.

Transaction activity has dwindled since last year, but values remain high: Some $925 million in apartments traded this year through September. With more than 9,000 units underway, we expect rent growth to remain tepid for the foreseeable future.

Read the full Yardi Matrix report.