Unseasonably warm weather has leasing agents across San Antonio looking ahead toward the busy leasing season during the spring and summer. Strong fundamentals and exciting new developments indicate San Antonio's booming multifamily market won't slow in 2017.
San Antonio's Affordability
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San Antonio's multifamily market is one of the most affordable in the nation. The Alamo City took 49th place among the most expensive rental markets in Zumper's National Rental Report. San Antonio's average of $900/month for a one-bedroom is far lower than other markets like Boston ($2,240) and Washington, DC ($2,090).
Across product types, multifamily deliveries peaked in 2016 at 7,100, increasing 40% over 2015. Roughly 4,700 of the completions were in Central, Far Northwest and Far West San Antonio. The development of affordable apartments is at a high, with five complexes totaling approximately 1,260 units underway in San Antonio. Four of these communities will be completed in 2017.
But how much longer will San Antonio's affordability last? In the past year, the average rental rate for one-bedroom units jumped up 11%, and two-bedrooms gained even more at 12.7%. While most other major metros are experiencing plateauing rates, San Antonio is part of a group of secondary markets with rapidly rising rents.
Sustained Demand
San Antonio's rising rates are an indication of strong fundamentals. San Antonio employers added 23,100 jobs in the last 12 months, growing the employment base by 2.4%. Steady employment growth encouraged a slight rise in the median household income, which ticked up 0.5% annually to nearly $53,800. This falls short of the qualifying income for a median-priced home by more than $7k.
According to the Federal Reserve Bank of Dallas, San Antonio is expected to add up to 30,000 jobs this year. The increase in single-family home sales and reduced housing starts ensure demand for multifamily units will persist.
Investment Opportunities
San Antonio's multifamily boom isn't limited to developers and leasing agents. Rising rents and improving conditions have investors enthusiastic about San Antonio. In its recent multifamily market report, Marcus & Millichap claims investors are considering a wide range of opportunities to enhance their portfolio. There is aggressive bidding for available assets, driving prices upward. This, combined with historically low interest rates, is spurring some owners who purchased years ago to list properties to capitalize on the favorable market conditions.
Other owners are using inexpensive liquidity to improve properties for higher rents, raising NOIs and property values. Cap rates, while holding firm between high-6% and low-7%, are higher than other major metros in Texas.
Roughly one-fourth of all transactions over the last year involved complexes with fewer than 100 units, priced below $5M. Buyer competition for these properties is intense as many feature sub-5% vacancy and steadily rising rents.
With competition heating up on all levels, San Antonio's Multifamily Boom looks to echo through the new year. Hear more about about San Antonio's multifamily forecast from market experts at Bisnow's Multifamily Boom. Register here.
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