Miller says San Antonio is an alternative to other markets, i.e., Austin, but without the hefty price tag.
SAN ANTONIO—The metro's multifamily market is on sound footing, according to Berkadia's Q1 2019 Multifamily Market report. For the past 12 months, the market would be best characterized by a reduction in apartment deliveries and an increase in leasing activity propelled occupancy and rents.
In this exclusive, Mike Miller, managing director for Berkadia's investment sales team, shared what's driving San Antonio's strong multifamily market, what makes it an attractive investment market and why investors keep coming back for more.
GlobeSt.com: Give us a snapshot of San Antonio's multifamily market right now.
Miller: It's very healthy. We've seen consistently steady growth, with new supply in check with demand. Between Q1 2018 and 2019, absorption outpaced deliveries, lifting occupancy up to 93% and effective rent up 3.9% to $977 per month. The jobs outlook is also positive. Local employers filled almost 23,000 positions over the last 12 months–a 2.2% increase year over year–and there were some large-scale job announcements including the initial hiring of 1,400 new workers at OKIN Business Process Services and 900 newly created jobs at Ernst & Young by 2023. In April, San Antonio's unemployment rate of 3.1% edged closer to its all-time low of 2.9%.
GlobeSt.com: Why do multifamily investors like San Antonio?
Miller: We're a viable alternative to other markets like Austin, but without the hefty price tag. We have steady but measured growth, as previously mentioned, relatively inexpensive market pricing and our cap rates are a few basis points higher than other metro areas. Word is getting out about that, and as a result, San Antonio is slowing moving out of the secondary market category and into the 'lower major market' category, as I like to call it.
GlobeSt.com: Do you expect a similar level of investor activity in 2019 versus 2018?
Miller: I think deal flow will slow, not because of investor demand but due to a shortage of product. We still see over 100 confidentiality agreements on every listing and the appetite for investing in our market is very strong. It's just become very competitive and for-sale product is a challenge, similar to other markets. That said, I still believe San Antonio has opportunities for investors with a range of criteria, and we have those higher cap rates as well. We continue to see solid fundamentals in almost all of our submarkets, with some exciting things happening in both the South Side and Inner Core markets with respect to older product.
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
