Ernest Brown IV, Kennedy Wilson
The story of the tortoise and the hare can be used to describe the major metros throughout Texas. In recent years, Austin has sprung to life while San Antonio has developed slow and steady. Most recently, however, it appears San Antonio’s office market has received a jolt — the second quarter of 2015 saw three to four times more activity than historic averages indicate — and San Antonio now boasts its lowest vacancy rate since 2008.
With a 3.4 percent unemployment rate, San Antonio ranks third on the list of major metropolitan cities across the country with the lowest unemployment rates, trailing only Austin at 3 percent and Salt Lake City at 3.1 percent. These numbers are indicative of a much larger picture of San Antonio. Uniquely positioned to capture the spillover of tech companies and supporting businesses from Austin, its neighbor, San Antonio’s low rental rates for both Class A and B office space along with stable infrastructure make it a viable, attractive alternative for many major businesses looking to expand.
But where in San Antonio is all this activity erupting? San Antonio’s newest residents are interested in one area, and you need look no further than the central business district. Commercial real estate developers are wasting no time capitalizing on this trend and changing the face of San Antonio along with the tastes of these newcomers.
To start, HemisFair Park — the original site of the 1968 World’s Fair — is undergoing construction to convert more than 18 acres into an urban district with multiple parks, residences and local businesses to serve the downtown area. Completion of the entire HemisFair District is set for 2020.
Construction is scheduled to begin in fall 2016 on San Antonio’s first new office tower in almost three decades — the Frost Tower. The proposed building is an iconic new headquarters for Frost Bank at Flores and Houston streets. San Antonio city councilman Joe Krier compared the proposed tower to an Austin office tower, in the way of it being a “wow building.” Weston Urban, one of two design teams behind the project, says it is committed to “building something special.” The goal of the tower is to deliver a building that will distinguish the San Antonio skyline and become a magnet for new residents and tourists alike.
San Pedro Creek was mistaken for a sewer at one point, but the $175 million project to transform the creek into a linear park will not only maintain and preserve its role in downtown flood control, but also re-imagine the creek as an urban park. This will be an ideal accompaniment to the urban office and residential development once completed. Although dirt has yet to turn for San Pedro Creek, residential plans are in talks as this revitalization is set to be a catalyst for the reinvention of the business district.
SA2020
Along with these major downtown developments, in 2011 a partnership was formed to implement the SA2020 vision, a framework plan with a set target of 7,500 downtown housing units. Currently, there are 22 residential projects under construction, some being rehabbed former factory buildings.
The total investment in these housing developments is more than $700 million. With all this urban development, who is the target market? Millennials. According to recent data from the U.S. Census Bureau, Forbes listed the Alamo City as number one for its increase in millennial population, trumping other major Texas cities. Houston ranked sixth, while tech-centric Austin and Dallas didn’t even make the top 10.
San Antonio’s 30 percent growth can be attributed to a surge in young population between 2010 and 2013. Millennials make up more than one third of the city’s medical technicians, biochemists and web developers. According to Workforce Solutions, nearly half the financial analysts in San Antonio are between 22 and 34 years of age. These are all professional positions being filled, and the demand continues to soar in areas in and around the city.
The infrastructure is already in place to accommodate the millennial population’s live/work/play lifestyle. San Antonio offers many trails throughout the city, making it a friendly outdoor hotspot to exercise for all ages, whether walking, running or biking. With the implementation of B-Cycle, a bike rental program with stations throughout downtown San Antonio, finding downtown entertainment or getting to work is easy and accessible.
Reasons attributed to the millennial boom in the Alamo City are variable and vast. For example, those just graduating from college but not wanting to move back in with mom and dad have a quite lot to consider: Where do I want to live? What can I afford?
Here in San Antonio, the average rental rate for a home is $990, whereas Houston, Dallas and Austin have median rates above $1,300. Millennials like single-family housing, but want city-centric amenities and that is exactly what Downtown San Antonio is offering with its new development.
It may appear that San Antonio’s recent jump in activity could just be a blimp on the radar. However, with its diversified economy and solid commercial real estate market, this renaissance stands to be much like San Antonio’s historic growth: “steady as she goes.”
— By Ernest Brown IV, managing director of brokerage, Kennedy Wilson. This article originally appeared in the November 2015 issue of Texas Real Estate Business.