Construction Surge Stalls Rent Growth in San Antonio

Despite a wave of new deliveries—which dampened rent growth to just 0.8 percent—the metro’s multifamily fundamentals remain healthy, sustained by above-trend employment gains.

San Antonio rent evolution, click to enlarge
San Antonio rent evolution, click to enlarge

Above-trend employment gains, falling occupancy rates and elevated deliveries characterized San Antonio’s multifamily market in 2017. Texas was among the top five states in the U.S. for job growth last year, thanks in part to San Antonio’s contribution. Rents were up 0.8 percent, reaching $987 but well below the 2.5 percent national rate. Even though a supply surge dampened rent growth, the metro’s multifamily fundamentals remain healthy.

Employment growth was diverse in 2017, with education and health services and mining, logging and construction leading the expansion. In addition to the hefty multifamily pipeline, new projects across the metro kept the construction industry busy. The list of notable projects underway includes the 23-story Frost Bank Tower, anticipated for delivery in 2019, and Oden Hughes’ 57-acre mixed-use development, to be delivered in three stages, with the first, 338-unit phase scheduled to open in late 2018.

San Antonio occupancy in stabilized properties remains the lowest among major U.S. metros, falling 90 basis points in 2017, to 92.9 percent as of December. Investors have set their eyes on San Antonio: Nearly $1.4 billion in multifamily properties changed hands in 2017, representing an all-time cycle high. Apartment construction is strong, with more than 7,100 units underway and an additional 19,000 in various planning stages, leading Yardi Matrix to forecast rent growth of 1.5 percent in 2018.

 Read the full Yardi Matrix report.