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Net absorption in the San Antonio retail market stood at 45,000 sq. ft. in the second quarter—up from negative 37,000 sq. ft. in Q1 2020—while leasing activity included 253,000 sq. ft. of signed deals..



Occupancy at 94.6%

Net absorption in the San Antonio retail market stood at 45,000 sq. ft. in the second quarter—up from negative 37,000 sq. ft. in Q1 2020—while leasing activity included 253,000 sq. ft. of signed deals. The overall occupancy rate decreased by 20 basis points quarter-over-quarter, and 50 basis points year-overyear at 94.6%. The retail market saw overall average asking rates increase by $0.60 per sq. ft. quarter-over- quarter to finish at $16.97 on a triple-net basis. A year ago, average rates were at $15.60, representing an 8.8% increase.


Economic indicators

The Federal Reserve Bank of Dallas reported that San Antonio’s metro unemployment rate ticked down to a still-elevated 11.8% in May, lower than the state and national rates of 13.0% and 13.3%, respectively. Despite employment growth in May, San Antonio net jobs declined an annualized 28.3% in the three months ending in May. All sectors experienced losses. The leisure and hospitality sector shed the most jobs at an annualized 73.5% (-40,520 jobs, not annualized). Health and education services fell 33.8% (-16,840 jobs), and professional and business services declined 23.1% (-9,170 jobs). Since early May, consumer spending (measured by credit and debit card spending) in San Antonio has improved more than in the state. However, as of mid-June, spending in San Antonio was down 6.9% relative to January 2020.



Supply and demand

The San Antonio retail market has grown to 112.9 million sq. ft., expanding the metro’s inventory by 6.6% or 7 million sq. ft. in the last five years. The amount of retail space delivered to the market during Q2 2020 was 270,000 sq. ft., compared to the quarter’s 45,000 sq. ft. of net absorption. Net absorption is the measure of total square feet occupied in existing buildings, (indicated as a Move-In) less the total space vacated (indicated as a Move-Out) over a given period. The new rooftops and jobs have driven demand for retail, which has led to an occupancy rate at or above 95.0% for the last five years, prior to the coronavirus (COVID-19) pandemic.


Investment sales

Real Capital Analytics data reports quarterly retail sales volume for Q2 2020 in the Greater San Antonio area at $2.5 million, down significantly compared to this time last year at $84.5 million. Most of the capital composition for buyers in 2020 was made up of 96.4% private investors. For sellers, the majority was 73.6% cross-border (a transaction is defined as cross-border if the buyer or major capital partner is not headquartered in the same country where the property is located), and 24.1% private investors. One of the largest sales transactions to take place in 2020 is the 159,703-sq.-ft. retail power center, Woodlake Crossing, located in Northeast San Antonio. The portfolio of five retail properties sold in May 2020 for $5.5 million ($34/SF), according to CoStar data. Inventrust Properties Corp. sold the shopping center to Elm Creek Real Estate who already owned the previously occupied shadow-anchor, Target property. Current tenants at the time of sale include Ross and Petco.


Leasing activity

Leasing activity fell during the second quarter, with a total of 253,000 sq. ft. leased in the San Antonio market—compared to 644,000 sq. ft. at this time last quarter. The amount of square feet leased by submarket had Northwest leading the way with 81,000 sq. ft. (32%); and North Central in second at 55,000 sq. ft. (22%). In April, noteworthy leases that took place were 14,950 sq. ft. taken by Cano Health at 100 S. Zarzamora St. in the Northwest submarket; 14,500 sq. ft. to be occupied by Humana at 6623 S. Zarzamora St. in the South submarket; and 12,585 sq. ft. leased by Service First at 12590 Bandera Road in Helotes in the Far Northwest submarket.


Average asking rents

The retail market in the San Antonio area saw triple net average asking rents at $16.97 per sq. ft. at the end Q2 2020, up between 3.5%—8.5% during the past year. Rent growth has varied across San Antonio submarkets, and with additional space likely coming available in San Antonio, tenants may have more leverage than at any time in the last decade with regards to negotiating rental rates, terms, tenant improvements and concessions. Comal County ($21.09 PSF) and Northwest/West Far ($19.50 PSF) submarkets currently have the highest annual overall average rate, followed by the North Central ($19.45 PSF). With the rising costs to developers that are bringing new projects with high quality space to the market, rental rates could remain elevated.


Home buying on the rise

The San Antonio Board of Realtors has announced positive increases across the board for the housing market for the San Antonio area. The reports showed homes sold in San Antonio during the month of June, increased by 14% compared to June 2019. During the same comparison period, the average price of a home increased by 3%. As predicted, June has shown to be a strong buying season. This can be seen by the pending sales of homes from June through July, consequentially resulting in a 32.6%.


The coronavirus outbreak

With a considerable amount of the economic growth of the San Antonio metro tied to the leisure and hospitality job sector, growth will likely suffer across the Alamo City. The path both the San Antonio economy and its retail market sector take will depend on how widely the virus spreads and how long social distancing needs to be maintained. Prior to the coronavirus outbreak, San Antonio had strong economic momentum, and the current statistics generally reflect the environment before the pandemic.

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

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