As we approach the end of the year, I thought it time to do an overview of the market place. Some of the analysis comes from the recent CCIM Symposium. All in all, we are bumping along the bottom, awaiting a reason to turn optimistic but uncertain about the proverbial “Light at the end of the tunnel.”
Jobs: Growth is up 1.8% with the unemployment rate down to 7.8% in San Antonio. Better than the rest of the country, but still the high mark for the past 20 years. This growth means 15,000 new jobs this year, thanks to San Antonio Military Medical Center and to the Eagle Ford Shale play, south of Bexar County. Eagle Ford should have years of production ahead of us. Welcome: EOG, Halliburton, Schlumberger, Weatherford, Baker Hughes, Chesapeake and many smaller service companies. They are taking jobs from and others who then must back fill by hiring new employees.
Did you know that Real Estate (Construction, Finance, etc.) is the third largest employment sector in the city? It has fallen from a high of 143,000 jobs at the peak to 120,000 at present, a 23,000 job decline.
Single Family Homes: The remaining builders have restructured for this slim economy, but no one is prospering. New home inventories are low and the annual rate of home starts is below 7,000, lower than the previous two years which were very weak. Remember, the long term trend is just over 10,000 new starts and we reached 19,000 in 2006. The lot shortage is here and will grow more critical over the next year to two years. The few banks that will lend are very strict in this market.
Multifamily: Occupancies are up to 92.5%, with 93.5% being the high back in 1995. Class A is currently over 95% leased. Rents are stronger and rising. Investment properties finally started moving again in Q4 2010, after a 3 year drought. Now new construction is kicking in with several thousand units in the pipeline. These will be absorbed, as they will not be coming available for another year. Urban Core Living is now in vogue: See The Can Plant at Pearl, 1221 Broadway, The 1800 (Broadway) and The Mosaic on Broadway.
Retail: Occupancies are up to 87% from a low of 86.3%, kind of flat for the past four years. New construction fell off a cliff. In 2008 3.5m Sq. Ft. were completed but fell to under 500,000 Sq. Ft. built in 2011. Rents are strengthening in Class A nationally anchored centers, while locally tenanted centers are still suffering.
Office: Occupancies are 80% now, down from 87% in 2007. Several new headquarters like KCI on IH-10 West and Nu-Star in The Rim will leave large gaps of office space to back fill. Class A rents are holding up.
Industrial: Flat with little new activity other than some oil service companies. Occupancies are 86.8%.
Let’s celebrate and give thanks that we had an OK year, and may the Best be yet to come!