What's Driving San Antonio's Hottest Submarket
A whopping 40% of San Antonio’s residential growth over the next decade will be in the Northwest quadrant, between Bandera Road and Highway 90 West, outside of 1604. That’s largely thanks to the success of Westover Hills, and yesterday, we got an update from the man behind it all.
Speaking at Bisnow’s annual San Antonio State of the Market event yesterday, Westover Hills developer Marty Wender says he never forecast everything that’d happen in Westover Hills when he began master-planning the 3,500-acre development in 1983. For one, he’d never even heard of a data center (now it’s a powerhouse in the sector). And at the time, there were no amenities out there (now Christus Santa Rosa is building its third MOB, and retail permeates the submarket). His focus at the time was just putting down the best infrastructure possible, and he says everything has sprung from that. Above, 200 attendees joined us at the Sheraton Gunter.
Marty, who was born in Fort Worth and never lived off of I-35, says he’s seeing an increase in financial services activity. Those firms are drawn to San Antonio for our Central time zone, low cost of living and bilingual workforce. Here’s Marty with his panel’s moderator, BURY principal Larry Heimer. (If Larry weren’t in real estate, he says he’d definitely be a fishing guide in Belize.)
CyrusOne senior director Scott Hanna (here between co-panelists JLL managing director Scott Lamontagne and USAA Real Estate director Austin Reynolds) explained why data centers love Westover Hills: CyrusOne has 363 criteria when it selects development sites. Westover Hills hit the most of them across San Antonio, with high marks for its seismic location, amenities and underground fiber optics. The firm just completed its second San Antonio building. Scott says CyrusOne serves 90% of Houston oil and gas firms, and many want to be able to move their services out during hurricanes. San Antonio is the perfect location for a backup location. Scott’s perfect non-real estate job: middle school football coach.
It’s hard to talk about Northwest San Antonio without discussing La Cantera. Austin (here with Big Red Dog’s Chris Weigand) says it’s as busy as ever. Two months into its construction, Harland Clarke took down the whole 130k SF spec office building underway. So USAA’s kicking off a sister building in a few weeks. (Austin says La Cantera could go up to 2M SF of office.) Absorption is picking up in that asset class; Austin says San Antonio soaked up 300k SF in ’13, but we’ve already absorbed more than 600k SF year-to-date.
That’s not all--The Residences are 50% pre-leased four months before delivery, and the firm plans to start Phase 2 in Q1 to double the units. USAA is putting a park between the phases, and will tie the development into Leon Creek. The hotel's being completely redone (you’ll hardly recognize it), and there are still 200 acres left to develop in La Cantera. If Austin weren’t a developer, he’d be a country singer, he says. (Only one problem--he doesn’t have the vocal chords for it.)
South Texas Medical Foundation president Jim Reed (sitting with Investment Realty Co’s Stephen Raub before his panel) says the South Texas Med Center employs 56,000 people, and handles 5.5 million outpatient visits a year. It’s been continually adding contiguous acreage through the years, but it’s run out of adjacent tracts. Now it’s improving quality of life and infrastructure, including consolidating surface parking into garages to free up space. Even so, activity is spilling past its boundaries. Jim says it’s also time to start redeveloping some of the older buildings; look for teardowns to start on Louis Pasteur soon.
Scott Lamontagne (networking with Prudential Real Estate’s Colin Whittier) gave the multifamily update—there are 7,740 units in various levels of the construction pipeline across Northwest San Antonio (3,538 units are in the dirt now). The submarket had an absorption hiccup last winter, but now occupancy is up 40 bps, and Class-A product is 95% leased. (He does think there might be some more absorption issues over the next six months.) Garden properties are bringing in from $1.20 to $1.60/SF, very solid rates.