San Antonio’s Retail Market Remains Tight

EXECUTIVE SUMMARY

Q2 2025 In Review

Despite a decrease in absorption and a slight dip in the average rental rate, San Antonio’s retail market remains robust, with continued strong fundamentals. Leasing activity for Q2 2025 totaled 758,887 sq. ft., a 46% quarterly increase and a 22% annual increase, which will boost future absorption in a tight market. Key leases included Crunch Fitness at Westlakes Shopping Center, NRG Adventure Park at Pavilions North Shopping Center, and Academy Sports at Courtyard Plaza. Net absorption decreased quarterly, posting 80,409 sq. ft., a significant decrease compared to the previous quarter; however, it represented a considerable increase compared to the same period one year ago. The vacancy rate remained at 4.0% quarterly but is up 10 basis points over the year. Low vacancy reinforces the landlord-favorable dynamics in the market.

Investment activity remained steady with 212 properties sold over the past year, averaging $208 per sq. ft. and a cap rate of 6.7%. Average rental rates dropped 2.3% quarter-over-quarter and rose 1.8% year-over-year, settling at $19.82 per sq. ft. (NNN), well above the historic average. Deliveries outpaced demand in Q2, but didn’t move the needle on vacancy, which, combined with healthy leasing activity, suggests San Antonio’s retail market is poised for sustained growth and continued investor interest.

MARKET OVERVIEW

According to the U.S. Bureau of Labor Statistics, the San Antonio unemployment rate increased from 3.4% in April 2025 to 3.7% in May 2025. The unemployment rates in Texas rose to 4.1% from 3.7%, and the U.S. rate rose to 4.4% from 4.0%. The San Antonio Business-Cycle Index, a gauge of economic conditions in the metro area, increased an annualized 7.2% in May.

San Antonio payrolls rose in May, increasing at an annualized rate of 2.6%. From February through May, payrolls grew 3.7% (10,800 jobs), with gains led by education and health services (6.6%, or 2,900 jobs and trade, transportation and utilities (3.9%, or 2,00 jobs). The federal government sector lost jobs. Year over year, total nonfarm employment growth in San Antonio was 1.5 percent, slower than gains in Texas (1.8 percent) and faster than the U.S. (1.1 percent).

Leasing Activity Up Quarterly and Annually

Leasing activity grew stronger in Q2, up 46% quarterly with 758,887 sq. ft. in Q2 2025. This was up 22% from Q2 2024. Notable leases recently signed include Crunch Fitness, which signed a 107,850 sq. ft. lease at Westlakes Shopping Center; NRG Adventure Park, which signed a 163,328 sq. ft. lease at Pavilions North Shopping Center; and Academy Sports, which signed a 152,036 sq. ft. lease at Courtyard Plaza.

Net Absorption Positive for the Quarter

Net absorption decreased by 60% over the quarter to 80,409 sq. ft. but increased by 360% year-over-year. Notable move-ins during the second quarter include CubeSmart & Wine Cellar taking 120,000 sq. ft. at 16227 Vance Jackson Rd, H-E-B moving into 116,000 sq. ft. at The Shops At Babcock, and EoS Fitness moving into 38,600 sq. ft. at 11761 Bandera Rd.

Vacancy Rate Remains Extremely Low at 4.0%

The overall vacancy rate in San Antonio’s Retail market is at 4.0%. This remains unchanged over the past three quarters and has increased by 10 basis points over the past year. Like most major Retail markets nationwide, vacancy is near record lows, giving retail tenants looking to expand limited options. San Antonio’s vacancy rate has remained under 5% since mid-2021.

Deliveries Decreased and the Construction Pipeline Increased

New deliveries for Q2 2025 were 23% down over the quarter, with 167,613 sq. ft. of new product completed. There is currently 1.6 million sq. ft. in the construction pipeline, up 16% quarterly and 95% 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, 212 Retail properties were sold in the San Antonio Retail market, with an average transaction price of $208 per square foot and an average capitalization rate of 6.7%. Notable sales in the second quarter include Valls Group’s purchase of a 53,704 sq. ft. hardware store located at 516 E I-10 in the Guadalupe County submarket for a reported $79.32 per sq. ft. Also, Baceline Investments, LLC acquired the 52,732 sq. ft. Crown Meadow Shopping Center for an undisclosed amount. The asking price was $12.1 million.

Rental Rates Up 1.8% Over Past Year, but Down 2.3% Over the Quarter

The average monthly rental rate (NNN) for San Antonio’s retail market is $19.82 per square foot. This represents a 6.1% increase over the past year and is just 2.3% below the all-time historical high. With vacancy rates low and construction activity increasing, rates are expected to remain relatively flat in the near term.

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