San Antonio's Top 5 Real Estate Trends And Happenings Of 2017

Transactions in the commercial real estate market over the last year have crystallized into five distinct trends for commercial real estate in San Antonio.

Loop 1604 Matures As Region's Retail And Apartment Anchor

Weitzman formalized its intention in December to put an IKEA at the intersection of Interstate 35 and Loop 1604, bringing 800K SF of retail space with it at what has become the hottest intersection in the city's fastest growth area.

The decision — initially announced at the end of 2016 — cements the city's northwest corridor as a maturing market. The area already is home to the city's hottest multifamily market growth, and the region's commitment to a five-year plan to expand the Highway 281 corridor is likely to fuel new growth.

An estimated 1,000 new apartment units have come online in the 1604 corridor in recent months. A number of high-profile out-of-town developers have announced commitments to the corridor: Austin-based Oden Hughes purchased another 57 acres off Bulverde Road; New York-based Abacus Capital Group announced its first project; and Houston-based Hines also entered the market. 

Big-Name Employers Deliver On Commitment To Downtown

Local companies also continue to put a major focus on Downtown. Frost Bank Tower, a $142M project and the first Downtown skyscraper in two decades, is the highest-profile example of new investment. But that investment has been continued with USAA's commitment to bring hundreds of new jobs Downtown and CPS Energy's choice to redevelop the former Valero headquarters.

The USAA announcement, in particular, is considered a huge gain for Downtown, with a potential 2,000 new employees at One Riverview. The expansion, named Project Blue, was fueled by $6M in city incentive funds, according to the San Antonio Express-News. Such infusions of capital have become a key negotiating tool in Downtown redevelopment.

CENTRO Stumbles, Mayor Asks For Full Review Of Nonprofits

The city's efforts to use incentive funds to close major development deals took a hit with embezzlement allegations in CENTRO and the departure of the leader of the Tricentennial Commission. In a Facebook Live video, Mayor Run Nirenberg described the situations as a violation of the public trust and a call to review nonprofit organizations.

“I want to assure you the alleged improprieties are not the norm,” Nirenberg said. “Still, I’m disappointed. I’m dismayed. And I am angry. These kind of events, even though they are rare, have the potential to undermine our work and distract us all from the pressing challenges of our city.”

Nirenberg noted the city had put aside $150M to work with 250 nonprofit organizations, including CENTRO. Nonprofit organizations, using city funds, improve the quality of the city. That makes the city more appealing for residents and developments and often leads to deals between the city and developers, often in tax-increment reinvestment zones.

San Antonio's mayor has outlined changes he wanted to see in nonprofit partnerships: annual training of nonprofit organizations on ethics requirements; new requirements for ethical and transparency standards in existing contracts; and closer oversight of nonprofit contracts by city officials.

Developers Continue To See Promise In Multifamily Market

Developers continue to show interest in the San Antonio multifamily market, despite tighter margins than neighboring Austin.

Interest in the central business district, in particular, has been hot in recent months with the completion of The Pearl and announcement of projects that will both capitalize on Downtown's existing historic fabric and add new high-rise properties to the skyline on the Riverwalk.

Downtown has typically been known for tourism. But a combination of incentives and momentum has made residential more attractive. That altered JMJ's plans from hotel to residential.

"Once we started studying the market, we saw the demand in the CBD to have more units in the urban core," CEO Tim Barton said at a Bisnow event. "It caused us to change a very tight site on the end of the river to something residential."

Austin-San Antonio Corridor Hits Sweet Spot On Industrial Space

The Interstate 35 corridor between Austin and San Antonio continues to be one of the hottest areas for industrial spec construction.

The presence of Amazon's distribution center outside San Marcos — and Austin traffic — probably have a lot to do with that trend. For the first time since 2014, annual net absorption in Austin's industrial space did not cross 1M SF, as activity has shifted south.

The corridor between the two cities has drawn strong interest. Recent announcements have included new spec construction by Titan and another 600K SF of spec industrial space in Buda incentivized by a triple Freeport exemption.