San Antonio‘s June 2008 apartment occupancy rate stood at 92.8 percent, according to M/PF YieldStar’s survey of about three-quarters of the metro’s entire base of 135,800 units. Illustrating just how well the metro has coped with its substantial recent deliveries, that figure is virtually identical to the occupancy reading seen in 2004, just before the run-up in new supply began.
Rent growth in San Antonio always tends to be fairly modest. In part, the significant flow of new product coming online keeps the leasing environment competitive at the top end of the market, and that keeps rent growth down. Also, operators can’t get too aggressive in their price positioning in a place where the median price for a single-family home is just under $150,000.
In general, then, annual rent growth around the 3 percent mark is the top performance for San Antonio apartments, even during the best of times, and mid-2008’s 3.3 percent annual rent bump was at the high end of the normal range. This growth pushed the metro’s average monthly rents to its current $708.
NEW NEIGHBORHOODS A little more than half of San Antonio’s total apartment stock is found in the northwestern and north central portions of the metro—upscale areas such as Westover Hills and La Cantera in the northwest and Sonterra and Stone Oak in the north central area—that are convenient to the biomedical employment hub in and around the South Texas Medical Center. These sectors likewise account for just over half of the apartments currently under construction in the metro.
Looking beyond the numbers, the evolution of the apartment communities coming on stream in San Antonio’s northern neighborhoods is noteworthy. Prior to the current building cycle, product in even these most desirable neighborhoods tended to target households who were renters by necessity, but a sizable block of the newest development here clearly focuses on lifestyle renters who could afford San Antonio’s entry-level, single-family homes. Developers going more upscale in product design include San Antonio-based firms such as Koontz McCombs Realty Development and The Lynd Co. as well as Phoenix’s Alliance Residential Co. and Dallas‘ Western Rim Property Services. At Western Rim’s new communities, for example, features include attached garages, hardwood floors, marble baths, and kitchens with granite counters and stainless steel appliances. Western Rim is San Antonio’s most active developer right now, having finished a 320-unit project in early 2008 and targeting completion of three more properties that total nearly 1,100 units in late 2008 and early 2009.
With San Antonio’s downtown employment base comprising a fairly small share of the metro total, developers have been slow to bring online much housing in the urban core. However, building activity is now kicking into higher gear. Look for late 2008 completion of Austin-based FaulknerUSA’s Alteza, 147 condo units on the top nine floors of the 34-story Grand Hyatt Hotel. Prices at the development start at $400,000, ranking these condos among the most expensive residential units anywhere in San Antonio. A few blocks away, the 20-story Vidorra condo project being developed by a pair of San Antonio companies, Presidian Development and DTMLS, features 300 units with prices starting at $200,000. Construction of the property should wrap up in early 2009. Downtown’s first apartment high-rise will be The Vistana, a 14-story Art Deco tower that includes 247 units, a landscaped recreation deck with pool and spa, 30,000 square feet of ground floor retail space, and a four-level parking garage. Locally-based Cross & Co. expects to complete the project in mid-2009.
Moving a little north of downtown, two notable rental properties by San Antonio-based Embrey Partners are on the way in the Alamo Heights/Olmos Park area. Artessa at the Quarry, totaling 280 units, is part of the mixed-use Quarry Village development, which also includes retail and office components in a pedestrian-friendly environment. Legacy Heights, a fairly high-end development on 13 acres featuring 306 apartments, is part of the revitalization of the Austin Highway corridor, now regaining its appeal after a long period of deterioration. Both Artessa at the Quarry and Legacy Heights should be completed in early 2009.
Looking ahead, San Antonio’s near-term apartment market stats are likely to appear very similar to the performances seen today. For investors, then, this is a market that can add stability to a portfolio, countering some of the extreme highs and lows that come in some of the nation’s most high-profile markets. And for developers, San Antonio now offers a more interesting playing field than ever before. Opportunities for more creativity and diversity in product design are becoming clear in the best established neighborhoods, as well as in areas bypassed in previous rounds of building are now on the radar screen.
FAST FACTS Considering San Antonio? Here’s what you need to know:
- 1.Population: 1.99 million
- 2.Occupancy: 92.8%
- 3.Median Age: 31.7
- 4.Median Household Income: $40,650
- 5.Average Rent: $708
6.Unemployment: 4.8% NOTABLE: The Alamo and the nearby River Walk are the top two tourist destinations in Texas. With few independent suburbs surrounding San Antonio, two-thirds of the metro’s residents live within the city itself. Hispanics account for about 60 percent of San Antonio’s populace, among the highest in any sizable U.S. metro.
MFE DOZEN:Raleigh, N.C. (January) A not-so-sleepy Southern town
Houston (February) Lone Star success
Huntsville, Ala. (March) A military movement
Lexington/Louisville, Ky. (April) No blues in the Bluegrass State
Seattle (May) A city on the rise
Orlando (June) A heated market
Kansas City (July) Feeling Midwestern momentum
Colorado Springs, Colo. (August) Rocky Mountain growth
Philadelphia (September) Independent streak
Columbus, Ohio (October) The heart of it all
San Antonio (November) Big-time development San Francisco (December) Bayside building sets sail