David Redfern, WaterWalk Hotel & Apartments
San Antonio, despite being the second largest city in Texas by population, sometimes takes a back seat to the Lone Star State’s other booming metro areas.
The city might not have the energy of Houston, the weirdness of Austin or the Cowboys of Dallas, but more than 1.4 million people call the Alamo City home, and businesses are starting to take notice. San Antonio has added more than 300,000 residents since 2000, and a reasonable cost of living makes it an attractive city for workers young and old.
The city continues to experience strong corporate growth and increased tourism activity, which is bringing more jobs to the city. San Antonio’s unemployment rate of 3.8 percent sits well below the national rate of 5.5 percent, and is also below Texas’ unemployment rate of 4.2 percent.
Texas is the home of oil, and recent price uncertainty has made some investors worry about the state’s big cities. But there’s no worry in San Antonio: While new oil and gas production from the Eagle Ford Shale south of the city is expanding and having a positive impact on the region, the presence of energy-related businesses in San Antonio represents only one sector of the vibrant business environment.
This insulation makes San Antonio a stable market that isn’t affected as much by fluctuating energy prices. From data center expansion to growth in financial services to the popularity of tourist attractions like SeaWorld and the River Walk, both new and familiar businesses continue to add jobs in the city, including many white-collar jobs with high yearly incomes.
As a result of this strong business environment and an expanding population, developers and investors are eyeing San Antonio for new multifamily and corporate housing opportunities.
Why Housing is Growing
The San Antonio market added almost 5,000 new jobs in 2014, and many of those positions came from corporate expansions and relocations.
These jobs are a mix of high-paying corporate positions and manufacturing, hospitality, technology and retail jobs. This influx of new workers has filled existing multifamily supply, and new apartment developments will be absorbed by the next flood of workers — the city’s economic development office expects another 4,000 jobs to be added this year alone.
One offshoot of San Antonio’s corporate growth is the need for corporate housing to serve employees in town on a temporary basis for project work or training programs, or as they relocate to the city. This demand is triggering widespread commercial development in San Antonio’s north and northwest, creating new opportunities for retail, hotel and multifamily projects that could make it a more vibrant live, work and play community.
The success of the Rim Shopping Center is proving the area’s prospects, and developers are answering by focusing on multifamily and corporate housing projects nestled between Interstate 10 and Loop 1604. Housing has also been expanding in the west along Route 151.
It’s a trend common throughout San Antonio’s neighborhoods: multifamily developments are sprouting up to add housing stock for the steady flow of workers moving into the city. These new developments are fulfilling the demand of both white- and blue-collar workers, some of which move out of corporate housing and right into established multifamily units.
Plus, many military families are relocating from local bases and into these developments. Go further north, and into areas just outside of San Antonio, and there is phenomenal growth for multifamily developments.
Both far north-central San Antonio and Far Northwest San Antonio were recently ranked as two of the nation’s busiest submarkets, and new multifamily supply is the main contributing growth factor for these areas. Overall, San Antonio’s multifamily vacancy rate hangs around 7.5 percent, but we expect that number to drop as new residents fill developments that recently came online to fulfill demand.
The transaction volume of the city’s multifamily developments is climbing, and this year has already seen new construction, improving rents, and a new flow of investment money. We expect these trends to extend beyond 2015 as corporate growth continues and population bends upward.
Diversified demand fuels growth. San Antonio, therefore, should remain a hot, yet remarkably stable, market for new residential development. The city’s low unemployment rate, diverse economic base and strong business environment should be welcoming signs for multifamily and corporate housing developers and investors looking at Texas.
— By David Redfern, president, WaterWalk Hotel & Apartments. This article originally appeared in the July 2015 issue of Texas Real Estate Business.