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San Antonio Retail

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Net absorption in the San Antonio retail market returned to positive territory in Q4 2020, at 154,000 sq. ft. This followed Q3’s -146,000 sq. ft. tally—only the fourth time in almost a decade that the San Antonio retail market recorded negative net absorption.


EXECUTIVE SUMMARY

Net absorption back to the positive side
Net absorption in the San Antonio retail market returned to positive territory in Q4 2020, at 154,000 sq. ft. This followed Q3’s -146,000 sq. ft. tally—only the fourth time in almost a decade that the San Antonio retail market recorded negative net absorption. For the full-year, net absorption finished 2020 at positive 81,000 sq. ft. Leasing activity—which is comprised of both new leases and renewals—included 357,000 sq. ft. of signed deals, down by almost 50% from this time last year, and less than the previous quarter’s 556,000 sq. ft. The overall occupancy rate decreased slightly by 10 basis points quarter-over-quarter, and 100 basis points year-over-year at 94.2%. The retail market saw overall average asking rates drop 0.7% per sq. ft. over the past year to finish at $15.96 on a triple-net basis. A year ago, average rates were at $16.07.

Economic indicators
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.

 


MARKET OVERVIEW

Supply and demand
The San Antonio retail market realized net absorption—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—of 154,000 sq. ft. in Q4 2020. During 2020, a total of 1.3 million sq. ft. was delivered to the market with almost 75% of that space occupied. Of the 1.0 million sq. ft. still in the pipeline, about 36% of that space is available.

Investment sales
Real Capital Analytics data reports quarterly retail sales volume for Q4 2020 in the Greater San Antonio area at $65.1 million involving 10 properties, down compared to this time last year at $100.1 million including 19 properties. The capital composition for buyers in 2020 was made up almost entirely of private investors at 90.2%, and for sellers, it was divided by 45.7% private investors, 38.9% cross-border investors (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 11.8% user/other investors.

Average asking rents
The retail market in the San Antonio area saw triple net average asking rents at $15.96 per sq. ft. to end 2020, a 0.7% decrease over the past 12 months. 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. The Central Business District ($23.20 per sq. ft.) and Guadalupe Co. ($18.87 per sq. ft.) submarkets currently have the highest annual overall average rate, followed by the North Central ($18.60 per sq. ft.).

Home sales increase in the San Antonio area
The San Antonio Board of Realtors reported that San Antonio and its surrounding communities saw increases across all categories for 2020. There were 38,448 homes sold during the year, which was an 11% increase over 2019. The average price of homes sold in 2020 was $294,106, with the median price for the year of $250,100. In all of Texas, the average price was $318,546, with a median of $260,000. In Bexar County specifically, through the year, there were 31,975 new listings, while there were 448,793 new listings in the state of Texas.


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

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