San Antonio Retail records 12th straight quarter of positive absorption 

EXECUTIVE SUMMARY

Q3 in Review
By the end of Q3 2023, the overall vacancy rate in the San Antonio retail market rose 10 basis points from 3.8% to 3.9%. Net absorption is at 113,478 sq. ft. Year-to-date, net absorption amounted to 733,589 sq. ft. Deliveries are at 196,498 sq. ft., increasing 35% from the prior year’s 145,422 sq. ft. Year-to-date, deliveries are at 826,600 sq. ft. The third quarter’s deliveries slightly outpaced net absorption by 83,020 sq. ft.—contributing to the slight increase in vacancy. In addition, leasing activity increased 29% to 589,023 sq. ft. The Northwest submarket contributed 202,472 sq. ft. (34%) to the third quarter’s leasing velocity—snatching up prospective tenants such as WSS (14,000 sq. ft.), Five Below (13,000 sq. ft.), and Relentless Breed (10,599 sq. ft.) Year-to-date, leasing activity totaled 1.6 million sq. ft. Lastly, the average asking rent rose to a record-high ($18.95 per sq. ft.), increasing 5% from $25.18 per sq. ft. in Q2 2023.

San Antonio Economic Update
San Antonio’s unemployment rate remained flat at 3.9% from July to August. The metro’s jobless rate was lower than the state’s rate of 4.1% and slightly higher than the nation’s rate of 3.8%. In August, San Antonio’s labor force increased an annualized 4.5%; these gains offset payroll growth, leading to a steady unemployment rate. The largest gains by sector included: leisure and hospitality (2,677 jobs, 25.6%), other services (371 jobs, 11.3%), and construction (326 jobs, 6.3%). The largest declines by sector included: professional and business services (-1,058 jobs, -7.5%), trade, transportation, and utilities (-878 jobs, -5.0%), financial services (-179 jobs, -2.1%), and manufacturing (-97 jobs, -2.0%).

MARKET OVERVIEW

12 Straight Quarters of Positive Net Absorption
Net absorption—move-ins minus move-outs—is at 113,478 sq. ft. Although down 58% quarter-over-quarter, net absorption has not dipped into negative territory since Q3 2020 (51,821 sq. ft.)—marking 12 straight quarters of positive net absorption. Year-to-date, net absorption amounted to 733,589 sq. ft. Move-ins within Q3 2023 included DD’s Discounts filling 23,500 sq. ft. of retail space at 12635 West Interstate 10 in August, and H-E-B occupying 55,000 sq. ft. of retail space at 850 FM 1103 in July 2023. On the quarter, deliveries outpaced quarterly net absorption by 83,020 sq. ft., which slightly increased the overall vacancy rate from 3.8% to 3.9%. Forecasts indicate that the overall vacancy rate will stabilize throughout the next five years—ranging between 3.9% and 4.1%.

Leasing Activity Increases 29% Quarter-over-Quarter
Quarterly leasing velocity—which is comprised of both new leases and renewals—stood at 589,023 sq. ft., up 29% from 456,574 sq. ft. in Q2 2023. Year-to-date, leasing activity registered at 1.6 million sq. ft. The Northwest submarket inked 202,472 sq. ft.—or 34%— of total leasing activity within the third quarter, rostering future tenants such as WSS (14,000 sq. ft.), Five Below (13,000 sq. ft.) and Relentless Breed (10,599 sq. ft.) These deals were executed in July, August, and September, respectively. One of the largest deals of Q3 was Pueblo Super Market signing a lease for 26,000 sq. ft. of retail space at 3719-3815 Blanco Road in July.

Record-High Asking Rents
As of Q3 2023, the average asking rent currently stands at $18.95 per sq. ft.—a record-high for the San Antonio retail market—up from $18.79 per sq. ft. last quarter. On the quarter, the CBD submarket had the highest average rate at $27.32 per sq. ft. On the other hand, the Northeast submarket had the lowest average rate at $14.85 per sq. ft. Asking rents are projected to remain on an upward trajectory—reaching roughly $24.00 per sq. ft. by Q3 2028

Alex Babcock
Senior Research Analyst
[email protected]
tel 713 275 9618