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San Antonio Retail Market Commercial Real Estate Quarterly Report Economic Data and Information

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The asking rent at night is big and bright, deep in the heart of San Antonio retail

EXECUTIVE SUMMARY

Steady demand for retail space

San Antonio’s retail market remained tight during the second quarter of 2018, with the overall vacancy rate rising slightly to 4.4%, an increase of 10 basis points quarter-over-quarter, and unchanged year-over-year. With the rate at such a low level, small fluctuations up and down are not particularly significant. Net absorption moved into negative territory at -34,449 sq. ft., with more tenants moving out than moving in during the second quarter. The retail market saw overall average asking rates rise $0.42 per sq. ft. quarter-over-quarter to finish at $14.21 per sq. ft. triple net—a level not reached in over seven years, or Q4 2010.

Unemployment rate remains below state average

The San Antonio unemployment rate decreased to 3.3% in May from 3.4% in April. Meanwhile, the Texas rate held at 4.1%, and the U.S. rate fell to an 18-year low of 3.8%. Labor force growth is an annualized 2.2% year to date, holding steady in May. Jobs in health care saw a significant acceleration due to a surge in hiring for ambulatory health care services, while leisure and hospitality employment fell, although food services jobs were mostly flat. Wholesale and retail trade also saw significant declines, pulling trade, transportation and utilities employment down.

San Antonio Retail Market Commercial Real Estate Quarterly Report Economic Data and Information graphic 1

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MARKET OVERVIEW

San Antonio retail maintains high occupancy

San Antonio’s retail market has been gradually tightening for the last two years and has seen occupancy rates at or above the current rate of 95.6% for five consecutive quarters, or Q2 2017. This is due in part to steady demand for existing retail space and controlled, yet growing, retail construction. This controlled growth will support the steady retail evolution taking place in the retail market. While new development has been slower to deliver, of the current projects in the pipeline about half are scheduled for completion in 2018. Contributing to negative absorption, two large blocks of space were put back on the market during the second quarter; 61,486 sq. ft. at Perrin Plaza and 58,000 sq. ft. at 7702 N. IH 35, both in the Northeast submarket.

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Private investor buys retail center in North Central San Antonio

Real Capital Analytics data reports retail sales volume year-to-date through June 2018 in the San Antonio area at $188.9 million, resulting in a year-over-year change of 91.3%. The buyer composition is made up almost entirely of private investors at 91.0%, and user/other investors make up the remaining 9.0%. A recent significant investment transaction in the San Antonio area retail market is the Woodside Capital Partners acquisition of San Pedro Towne Center at 7122 San Pedro, a 101,169-sq.-ft. retail shopping center from LNR Partners. The property was 88.5% occupied with tenants such as Dollar Tree and Maverick Cleaners at the time of sale.

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Rents climbing back up

The tight retail market continued to push San Antonio metro asking rents up, reaching $14.21 per sq. ft. to start the second half of 2018 at a seven-year high. At the end of the second quarter, prices climbed 4.0% above the price a year ago of $13.67 per sq. ft. While retail availability is limited across the San Antonio area, it is particularly tight within the South submarket, with a total inventory of approximately 10 million sq. ft. with a vacancy rate of 3.0% and the average asking triple net rent at $14.03 per sq. ft. The squeeze is also on for space in the New Braunfels/Comal County submarket, representing 6.0 million sq. ft. of rentable retail area with only 211,000 sq. ft., or 3.6% of inventory vacant, and an average asking triple-net rent in the $19.00-per-sq.-ft. range.

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Leta Wauson
Director of Research
[email protected]
tel 713 275 9618

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