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San Antonio multifamily volume remains soft, but as more clarity becomes available on the market, capital is starting to return to the Alamo City.

 

Market Highlights

Sales. The coronavirus outbreak has slowed transaction activity, though buyers and sellers are starting to feel confident again. San Antonio multifamily volume remains soft, but as more clarity becomes available on the market, capital is starting to return to the Alamo City. Fourth quarter volume echoed recent averages, but pricing has held steady, indicating investors’ optimism on future growth in San Antonio. Based on recent activities, 2021 could surpass 2019 levels when more than 17,000 units changed hands. About 70% of the major transactions in the past year occurred north of the I-410 Loop, 30% in Northwest Side, and 40% in Far North Central. Older assets, built in the 1980s, have sold at cap rates around 6%. Pricing continues its steep increase and is now more than 20% above its previous cycle peak in 2007, and new institutional assets are selling at cap rates as low as 5%.

Vacancy. Given that a global pandemic continues to stall significant economic growth, apartment demand has been robust. In July, August and September 2020, San Antonio had one of the strongest absorption figures in the country, both on a nominal and percentage basis. About 2,200 San Antonio multifamily units were absorbed, the highest single quarter for absorption since the turn of the century. Despite the robust demand, however, vacancies remain elevated.

Economy. The Federal Reserve Bank of Dallas reported that San Antonio’s metro unemployment rate increased sharply in November to a six-month high of 7.8%, which is below the 8.1% for the state but above the 6.7% for the nation. Net new payrolls in San Antonio increased an annualized 2.5% (6,160 jobs) in the three months ending in November, with mostly positive but weakening growth across sectors. While job gains have been broad based since May, they have not been large enough to offset the losses in March and April. Local consumer spending improved in mid-November and early December, and the number of small businesses open increased briefly around the Thanksgiving holiday.


Leta Wauson
Director of Research
leta.wauson@naipartners.com
tel 713 275 9618

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