San Antonio Is 'Getting Its Hair Done And Putting Its Makeup On'
San Antonio will only get better from here, panelists at Bisnow’s Future of Downtown San Antonio event feel. The market is full of incredible opportunity and a deep culture combined with rising rents is making it highly desirable from a developer’s perspective.
“We’re in a market in transition,” Graystreet Partners managing partner Kevin Covey says. “San Antonio is getting its hair done and putting its makeup on.” Attracting investors to the area is easy, he says, because they’ll get the returns of a secondary market with the competition of a tertiary market.
Harris Bay managing partner Jake Harris agrees, adding that San Antonio is a unique market. “With the 25th-largest MSA population in the US, it should be considered a secondary market, but it’s treated as a tertiary market. We think it’s running under the national radar,” he says.
With huge increases in office rents, Graystreet director Kamil Alvi thinks the city’s at an inflection point for demand. People are coming because housing is shockingly cheap. “You can pay $1.20/SF for an apartment in San Antonio. If you’re paying $1.20 in New York, there are probably illicit substances being traded in your hallway,” he jokes.
The City of San Antonio is doing a lot to work with developers. “This is probably the best municipality we’ve worked with across the markets we’re involved in. Some can be incredibly difficult to work with,” Jake says. Kamil agrees, touting the City of San Antonio as one of the most helpful he’s seen.
“Design is of the utmost importance,” Kevin says of attracting Millennials and others to San Antonio. “We’re in a very competitive world. Before, you could produce a product that was good, sell it in an underwhelming space and do well. Today, going to a restaurant is not so much about the food anymore. You need to eat the air, eat the space, and the food is just expected to be good. It has started to be a little bit of entertainment too, and part of that is the design of the space.”
Kamil doesn’t think attracting Millennials is as difficult as it’s cracked up to be. Millennials, he says, aren’t fundamentally different from Baby Boomers or any other generation. “Their spending habits are essentially the same: spend until you’re 40 or so and then start saving,” he says. The key difference, he feels, is that Baby Boomers wanted homogeneity but Millennials want a sense of authenticity.
San Antonio’s future, according to both Jake and Kevin, will be dictated by the role driverless cars will play. “We think one of the things people aren’t really paying attention to enough is the driverless car,” says Jake. Eliminating the cost of a car allows people to buy or rent a nicer home than they otherwise could.
“I'm usually criticized for being such a loud proponent of the autonomous vehicle,” Kevin says. “It will be much cheaper to move around in an autonomous vehicle than it is to own your own car. The autonomous vehicle is going to completely change the pattern of development. I think it will lead to a declining suburb.” The autonomous vehicle, he says, will allow for much higher speeds on existing infrastructure. Thirty years from now, people will either be living Downtown or a considerable distance away, not in between.
San Antonio’s immediate future looks bright. Ten years from now, Kevin thinks, San Antonio’s rental rates on many asset classes will justify new development. “Retail will be about artisanal products. Everything will be about narrative, about telling stories,” he predicts. “We’ll see a lot of newer office buildings and high-rise apartment buildings.” In 10 years, he thinks, 100,000 more people will be living Downtown.