Commercial Real Estate
This is the time of year when everyone tallies how good/bad things were last year and how they expect them to be this year. All in all, San Antonio looks pretty good!
« Starting close to home on the personal housing front, San Antonio Business Journal announced that San Antonio ranked 4th on Zillow Group Inc.’s list of the top hottest housing markets for 2022 and Austin dropped to 10th place after holding 1st in 2021. In December 2021, 8,415 single-family homes were on the market in the region, compared to 14,719 in February 2020, according to Zillow Group Inc. and less than half of 2019’s peak level of 16,972 homes. Low mortgage rates, population growth and new jobs will continue to contribute to our red-hot housing market in 2022. Homebuilders are actually having to slow play construction because of supply chain issues and labor shortages. These will eventually resolve themselves, but it will probably take at least a year and the effects will linger much longer. This has contributed to a boom in new construction of single-family rentals, which is a red-hot market for investment now, but they suffer the same issues with low lot availability and material shortages.
« Violent crime seems to be on the rise all across the country. So, I went to the City of San Antonio website to see how things are here and discovered that the total of the categories that make up violent crime (homicide, rape, robbery, and aggravated assault) has been nearly level over the past six years. Good for us!
San Antonio the Super-Sun-Belt Magnet
« Each year, Urban Land Institute and PwC (formerly Price Waterhouse Coopers) publishes an extensive study of commercial real estate entitled “Emerging Trends in Real Estate.” This year in the “Overall Real Estate Prospects” category, San Antonio ranks #21; Nashville is #1, Austin #4, Dallas #7 and Houston #24. When it comes to population growth and economic opportunity, San Antonio is ranked as a Super-Sun-Belt Magnet, growing well above the national average, with good prospects for millennials and gen-x’ers. On the retail front, San Antonio is ranked one of the top markets for investment in the U.S., higher than Austin and Dallas. We are ranked the highest for hotel property buys, high for multi-family and industrial, however, for office we rank lower. We are seeing an abundance of investment capital looking for deals, and there is generally no lack of buyers for good properties.
« Green Street is one of the top national commercial real estate investment research firms and their all-property price appreciation index increased a remarkable 24% in 2021. Peter Rothemund, Co-Head of Strategic Research at Green Street said, “It will be really hard to match last year’s pace, but many of the forces driving prices higher remain in place. Property prices could post another double-digit gain this year.” There is an enormous amount of equity looking for investment opportunities, however, interest rates and inflation are the spooky unknowns in the room so we will have to see what they do to us.
« We all have heard that manufacturing is becoming a more important growth industry in the United States, because of the supply chain issues resulting from Covid and our propensity for importing goods from China through our huge but limited number of west coast ports. Not surprisingly, L.A. is the largest manufacturing market in the U.S. with 381 million square feet. But you may be surprised that the fastest growing manufacturing market is Savannah, Georgia. They have a huge east coast port they expanded in the past few years to accommodate the super-max ships that can make it through the newly expanded Panama Canal. This means that more cargo can come into its port and thus manufacturing is increasing very rapidly there. But you didn’t know that San Antonio is the second fastest growing manufacturing city in the U.S., according to CBRE’s research report. This may largely be due to the Navistar facility being finished on the southside, not far from Toyota and the Aisen plant in Cibolo. Currently, nearly 10-million square feet are in the works here.
Remember also the four-phase, $651 million infrastructure project to greatly expand the Port of Corpus Christi. This will help imports into our region and may eventually spur more manufacturing in San Antonio, too.
One very specialized but extremely important type of manufacturing is making semi-conductor chips. The U.S. has been importing them, mostly from Taiwan, the home of Taiwan Semiconductor, largest chip manufacturer on the planet, producing over half of all chips. These plants are actually called “foundries” or “fabs” for short. Well, you may have noticed in the news that China has made no secret that it considers Taiwan a part of “China” while the Taiwanese feel quite the opposite. In fact, a Chinese takeover of Taiwan, by force or some softer method, may be a possibility in the next few years.
New Fab Construction
Thus, we see that U.S. companies are ramping up the construction of new fabs, as the manufacturing method requires newer and more sophisticated facilities. Samsung just announced their new fab will be built in Taylor, just northeast of Austin, at a cost of $17-billion, the largest foreign direct investment in the state of Texas, ever. Texas Instruments has announced a $30-billion facility to be built in far north Dallas, that is, Sherman. (Yes, Sherman is now North Dallas.) Taiwan Semiconductor (TSM) has just finished a $12-billion fab in Phoenix, while Intel has announced a $20-billion fab investment in Arizona and a $20-billion fab in Ohio, as well.
Then, in early February, the House passed a bill that includes about $52 billion in grants and subsidies to help the semiconductor industry and $45 billion to strengthen supply chains for high-tech products. Now it is unlikely San Antonio will see any of this, but the availability of chips affects nearly everything we buy, and also the production schedules at Toyota and Navistar. We will benefit from U.S. “chip independence” as much as we could benefit from “energy independence.”