High-Visibility Centers are Completely Occupied

Parman of Weitzman says the market is tight with a lot of projects on the drawing boards.

SAN ANTONIO, TX—With so much tenant interest, the market for class-A space remains tighter than the overall market, and centers at the best-performing intersections and retail districts throughout San Antonio are often completely occupied. San Antonio’s retail market posted a healthy occupancy rate of 94% as of mid-year 2016, even as key vacancies from Sports Authority came onto the market. 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. Indeed, San Antonio’s retail market continues to benefit from the continued soundness of the metro area’s economy, which ranks as one of the better-performing major markets in Texas and the country. The occupancy rate is based on a review of San Antonio area multi-tenant shopping centers with 25,000 square feet or more and a retail market inventory of 44.9 million square feet conducted by The Weitzman Group and Cencor Realty Services . Bryan D. Parman , senior vice president of The Weitzman Group, tells GlobeSt.com: “The market is tight, and we are seeing a lot of projects on the drawing boards as a result. At the end of the day, we are running out of available space. All of the well-located centers are in the high 90%-occupancy range, and we’ve seen power centers that two or three years ago had 40,000 square feet of vacancy are now down to about 15,000 square feet of availability. You look at all that, and the strength of the economy now and for the foreseeable future, and that certainly will justify an increase in multi-tenant space along with the anchors that are getting built.” The market’s construction pace is on track to add approximately 1.3 million square feet for 2016, making it the most active construction market since 2014, when 1.4 million square feet was added to the market. a major metro retail market in the midst of strong economic growth, 1.3 million square feet is extremely conservative. In contrast, during 2015, the market added less than 900,000 square feet. However, a number of major retail projects are on the drawing board, and of these, several are expected to break ground by year-end 2016 or in 2017. The market’s limited retail construction is dominated by anchor stores, most notably Walmart and H-E-B. Those retail projects opening or scheduled to open by year-end 2016 for Walmart include both large-format Supercenters and smaller Neighborhood Markets, which are each approximately 42,000 square feet. These anchors come on line 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. Average class-A asking rents for small-shop in-line spaces in the market’s strongest centers, including new construction, ranged from $26 to the mid-$30s per square foot per year. These rates are for small-shop space in the newest and/or strongest anchored projects and for leading class-A retail centers, rates can reach the $40 per square foot or higher level. Class-B asking rates typically are in the $19-to-$23-per-square-foot range while class-C asking rates are in the $14-to-$18-per-square-foot range. The reported rates are average asking rates and do not take into consideration concessions. Rates can be higher or lower depending on location, co-tenancy, center condition and other factors.