San Antonio’s Retail Market Remains Tight

EXECUTIVE SUMMARY

Q1 in Review

Despite a slight slowdown in leasing activity, San Antonio’s retail market continues to demonstrate robust fundamentals. Leasing activity for Q1 2025 totaled 518,762 sq. ft., a 16% decline year-over-year, primarily due to a limited supply of second-generation space available for backfill. Key leases included Eos Fitness at Bandera Pointe, Walmart Neighborhood Market at 10781 Toepperwin Rd. and Picklr at Gateway Plaza. Net absorption increased quarterly, posting 202,581 sq. ft., a significant increase compared to Q4 2024; however, a large decrease compared to one year ago. The vacancy rate remained at 4.0% quarterly but is up 30 basis points over the year. Low vacancy reinforces the landlord-favorable dynamics in the market.

Investment activity remained steady with 197 properties sold over the past year, averaging $221 per sq. ft. and a cap rate of 6.7%. Average rental rates rose 6.1% year-over-year, reaching $20.28 per sq. ft. (NNN), near record highs. With demand still outpacing new supply, rental rates are expected to continue their moderate upward trajectory. Overall, San Antonio’s retail market is poised for sustained growth, supported by its low vacancy, rising rental rates, and continued investor interest.

San Antonio Economic Update

The San Antonio unemployment rate fell from 3.9% to 3.8% in February 2025. The unemployment rates in Texas and the U.S. both rose to 4.1%. The San Antonio Business-Cycle Index, a gauge of economic conditions in the metro area, increased an annualized 0.7% in November.

San Antonio payrolls rose in February, growing 0.3% (300 jobs) annually. From November to February, payrolls grew 1.4% (4,300 jobs), with gains led by education/ health services at 6.7% (3,000 jobs), government at 3.0% (1,400 jobs), and trade, transportation and utilities at 0.9% (500 jobs). Manufacturing, leisure and hospitality, information, financial activities, and federal government sectors lost jobs. Year over year, total nonfarm employment growth in San Antonio was 1.6 percent, faster than gains in Texas (1.4%) and the U.S. (1.2%)

MARKET OVERVIEW

Leasing Activity Down, Partially Due to Limited New Deliveries

Leasing activity remained healthy, down only 8% quarterly with 518,762 sq. ft. in Q1 2025. This was down 16% from Q1 2024, largely due to limited options in secondgeneration space to backfill. Notable leases recently signed include Eos Fitness signing a 38,500 sq. ft. lease at Bandera Pointe, Casa Bella Furniture signing a 38,000 sq. ft. lease at Ingram Park Plaza, and The Black Friday signing an 18,700 sq. ft. lease at Lake Center Plaza.

Net Absorption Positive for the Quarter

Net absorption was up over the quarter by 182%, to 202,581 sq. ft., but down 68% annually. Notable move-ins during early 2025 include Burlington taking 78,000 sq. ft. at 522 NW Loop 410, Walmart Neighborhood Market moving into 37,000 sq. ft. at 10781 Toepperwin Rd., and Picklr moving into 26,600 sq. ft. at Gateway Plaza.

Deliveries and Construction Pipeline Increase

New deliveries for Q1 2025 increased over the quarter with 218,062 sq. ft. of new product completed. There is currently 1.4 million sq. ft. in the construction pipeline, up 7% quarterly and 99% annually. With new supply and demand balanced, market fundamentals are expected to remain strongly landlord favorable for the foreseeable future.

Investment Sales Trends

Over the past year, 197 Retail properties were sold in the San Antonio Retail market with an average transaction price of $221 and an average cap rate of 6.7%. Notable sales in early 2025 include F&A Rental Properties LLC’s purchase of a 12,900 sq. ft. CVS in Fair Oaks Village for a reported $411 per sq. ft. Hle Texas Properties acquired a 24,192 sq. ft. Storefront Retail/ Residential property located at 209 W San Antonio St for an undisclosed price.

Rental Rates Up 6.1% Over Past Year, Near All-Time High

The average monthly rental rate (NNN) for San Antonio’s Retail market is $20.28 per sq. ft. This is up 6.1% over the past year and at an all-time historical high. With vacancy rates low and limited construction underway, rates are expected to increase moderately over the next few quarters.

Related Research Reports

Shopping Without Borders: Why Omnichannel Retail Reigns Supreme

Steve Triolet
SVP of Research and Market Forecasting
tel 214 223 4008
[email protected]