San Antonio/ Real Estate & Development
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Published on April 02, 2024
San Antonio and Austin Apartment Markets See Flux Amid Construction Boom and Occupancy ShiftsSource: Google Street View

San Antonio's apartment landscape is experiencing a flux, with signs of both overabundance and anticipated growth shaking the market. According to a report by FOX San Antonio, the San Antonio Apartment Association suggests that the influx of new apartment complexes could drive down rent rates as the city swells with new construction developments.

Alan Gonzales, Executive Director of Business Development for Galaxy Builders, noted that after a slow period during the pandemic, the construction of large apartment complexes is picking back up, asserting, "Every single forecast that we have, everyone in the industry for construction for housing, certainly for multifamily and apartment complexes, we’re seeing by the end of the year and beginning of next year that there’s going to be a lot more started up we have a pretty thick pipeline of projects that are going to get started," as told to FOX San Antonio. The association forecasts approximately 17,000 new units to be available by the end of 2024.

However, MRI ApartmentData highlights a different aspect of the current situation; stating that a modest increase in occupancy rates recently to 87.7% still favors tenants over landlords, and over half of Class A properties are offering concessions to entice more residents, signaling a saturated market that could potentially reverse, according to San Antonio Business Journal. Bruce McClenny, an industry principal at MRI ApartmentData, shared, "I think it would be reasonable to say that we're oversupplied, as all markets are right now," suggesting that all covered markets are facing similar challenges due to the recent construction boom.

The nearby Austin market is also staggering under these tendencies, facing a stark reality with an occupancy rate dipping to 86.5% in December 2023, a confounding dive when compared to its steep 24.5% rent growth back in 2021, however, it's also seeing positive absorption rates, meaning occupancy could eventually stabilize but if the developers all try to jump back into the market to catch the anticipated upswing at once, it could upset the anticipated stabilization the whipsaw effect McClenny refers to could effectively be neutralized by such a rush, McClenny further elucidated in statements reported by San Antonio Business Journal.

Both cities, with San Antonio leading slightly, are facing dynamic conditions that could impact renters and landlords alike. The abundance of units has tempered rental rate growth in the region, with rates in San Antonio declining by 1.4% over the past 12 months. This adjustment in the market, combined with the projected increase in multifamily developments, will require close monitoring to see whether rent prices will ultimately decrease or if the market finds a new equilibrium.