As we near the end of 2016, we also mark another strong year for the San Antonio retail market. In fact, the market is strong enough that we can retire the word recovery and replace it with expansion.
David Nicolson, The Weitzman Group
Expansion, in a nutshell, means that the retail market has not only matched the pre-recession occupancy level of 92 percent, it has exceeded it. San Antonio currently boasts a healthy occupancy rate of 94 percent, even as key vacancies from Sports Authority came onto the market during the past year.
The Alamo City is able to maintain the balance due to the fact that vacancy added by the sporting goods retailer was offset by fully leased construction and the backfilling of major retail box spaces.
The Weitzman Group currently reviews approximately 45 million square feet of retail inventory in San Antonio centers with 25,000 square feet or more.
Like the retail market, San Antonio’s economy also continues to grow, based on solid population and job growth. The metro area market, as of September 2016, reports an unemployment rate of 4.1 percent. This is well below the country’s rate of 4.8 percent, according to the Texas Workforce Commission.
The metro area also ranks No. 6 in the nation for population growth among markets with 1 million people or more. The San Antonio area recorded a growth rate of 2.2 percent during the U.S. Census Bureau’s most recent 12-month survey period for population growth. With an increase of 51,285 new residents, San Antonio’s metro area ranked as one of only 16 areas nationwide to gain more than 50,000 people during the 12-month census survey period.
High Occupancy Continues
Due to the expansion of leading concepts in existing space, the market for Class A space remains tighter than the overall market. In fact, centers at the best-performing retail districts throughout San Antonio are typically completely full.
The market’s limited retail construction is dominated by anchor stores, most notably Walmart and H-E-B. These anchors come online with limited or even no small-shop space, ensuring a tight market for space during a time of steady demand for restaurant, services and shop space.
When we finalize our year-end report for San Antonio, we expect to see that the market will have added right at 1.3 million square feet during 2016. For a market with high occupancy, the construction total remains conservative. That fact, combined with a construction market dominated by new anchor spaces, means that new construction adds to occupancy, not vacancy. The new space is on track to represent an increase over 2015, when the market added less than 900,000 square feet.
We do expect to see construction increase during 2017, based on projects now underway or set to break ground this year and in 2017.
One retailer, Walmart, dominates new space for 2016. Walmart is rolling out both large-format Supercenters, up to more than 180,000 square feet, and smaller Neighborhood Markets, which are each approximately 42,000 square feet.
Close behind Walmart is San Antonio’s No. 1 grocer, H-E-B, with new stores for both 2016 and 2017 and beyond.
New Walmart stores include:
• An approximately 182,000-square-foot Supercenter at Cibolo Valley Drive and Borgfeld Road in Cibolo;
• An approximately 155,000-square-foot Supercenter at the northwest quadrant of Boerne Stage Road and IH-10. The store anchors Boerne Stage Crossing, which plans future phases;
• A Supercenter at 510 Kitty Hawk Road in Universal City.
For 2016, Walmart also is expanding with opened smaller Neighborhood Market stores with nearly a half-dozen new locations.
H-E-B, San Antonio’s leading grocer in terms of market share, also is one of the two key anchors dominating new construction for 2016. H-E-B’s new stores include:
• A 120,000-square-foot Plus! store that opened in June in New Braunfels. The store is located at 2965 I-35 at FM 306;
• A 100,000-square-foot H-E-B located at 1368 East Court Street in Seguin, which represents the relocation and expansion of an adjacent smaller location, which is being demolished for parking.
Additional H-E-B stores are in the works for 2017, including one planned for a site at the intersection of Bulverde Road and Loop 1604.
A newcomer grocer, Natural Grocers by Vitamin Cottage, also entered the market in 2016 with two new stores. The first store, with 15,000 square feet, opened at 13310 NW Military Highway, and the second store located at the site of a demolished retail building at 6514 N. New Braunfels Ave.
While grocers dominate the market’s new space, we are seeing some non-grocer retail activity this year. These retailers or centers include:
• Academy Sports & Outdoors, with a newly built 62,942-square-foot store (a relocation) at 7503 S. Zarzamora at IH-35;
• Rooms To Go, which opened a newly constructed store at 15339 IH-35 North in early 2016. Rooms To Go’s new store format averages approximately 40,000 square feet;
• Sun & Ski, a specialty sporting goods store, with a new-construction store totaling 10,700 square feet at The Rim;
• Santikos Theaters, with a new 16-screen location called Casa Blanca at 11210 Alamo Ranch Parkway. The approximately 110,000-square-foot mega-theater includes a host of entertainment and dining options, including a bowling alley, a café, a gelato station, cocktails and beer and wine;
• The Plaza at Vance Jackson, a retail strip center with 28,000 square feet at the southeast corner of Vance Jackson and UTSA Boulevard.
One positive sign for our market is the fact that the already limited market for large available vacancies is shrinking even more during 2016. For example:
• At Home, a Texas-based home décor superstore, absorbed one of San Antonio’s largest remaining vacancies by leasing a 118,000-square-foot former Target store at 8421 U.S. 281 North, near North Star Mall. The store recently opened;
• West Elm, the upscale home furnishings chain, which opened an 11,000-square-foot store at 201 E. Grayson Street, near downtown, in the process absorbing a long-vacant space;
• F21 Red, a family apparel concept from Forever 21, which leased 22,000 square feet in part of a former JCPenney Home Store at Ingram Festival, a mall-peripheral power center;
• YMCA of Greater San Antonio, with a 2016 opening in a 53,570-square-foot former grocery store located at Potranco Road and Highway 151;
• J. Crew Mercantile, a new concept from J. Crew, which opened in existing space in the high-profile Alamo Quarry Market;
• The multi-tenant redevelopment of the historic Joske’s building, circa 1887, in downtown San Antonio’s Rivercenter. The space, branded Shops at Rivercenter, features a 33,000-square-foot Dave & Buster’s that opened in January and a two-story H&M, which opened in February. Other new concepts locating at the mall’s redeveloped vacant space include Jimmy Buffet’s Margaritaville, Yard House and Johnny Rockets.
As you can see, the greater San Antonio retail market benefits from the continued soundness of the metro area’s economy, construction dominated by anchors and retailer expansions that absorb vacant space.
That’s why we can confidently say the San Antonio retail market is in the midst of a healthy expansion.
— By David Nicolson, president, San Antonio office, The Weitzman Group. This article originally appeared in the November 2016 issue of Texas Real Estate Business.