While our days seem in a vortex of negative news, pandemic fears, election uncertainties (will there be a credible result by Wednesday November 4th?), etc., let’s step back a moment and look at what we actually know is going on in our area. Here is a collage of news items I have gathered the past month.
Top Areas for Real Estate Development
Black Knight reports that despite home prices rising 97 months in row, affordability is the highest since 2016. For the same monthly payment, buyers can now afford almost $32,000 more home than they could a year ago. The report notes that thanks to low mortgage rates, buying power is up 10% from a year ago. In that time, the average home price increased more than $12,000, yet the average monthly payment went down 6%! In S.A. sales in July were up 25% vs. July 2019; and inventory dropped from 3.9 months to 2.6. Vancouver-based Resonance Consultancy Ltd., which specializes in marketing, strategy, and research for the real estate, tourism, and economic development sectors, ranks large U.S. cities by relying on a mix of 26 performance and quality measures. This year, New York City tops the list, while Dallas is 14, Austin comes in at No. 17 and San Antonio at No. 28. Austin-Round Rock and San Antonio-New Braunfels are among the top secondary Metropolitan Statistical Areas (MSAs) for commercial real estate investments, according to Trepp, a leading provider of data, analytics, and technology solutions to the global securities and investment management industries. The Texas capital ranked first overall, and first in both population growth and unemployment rate. San Antonio ranked fourth overall and had the second-lowest delinquency rate. It was fifth in both population growth and unemployment, sixth in outstanding volume growth, ninth in lodging and retail exposure, and 13th in average occupancy. The national unemployment rate has dropped to 11% while San Antonio’s is even lower at 7.1%; although that is higher than the sub-3% rate at the beginning of the year, an historic low, it is still a great improvement. Now with the enhanced unemployment benefits coming to an end in July, the unemployment rate may fall quickly. Many businesses were having trouble re-hiring, since workers made more on unemployment than by a paycheck. August should be very interesting.
Occupancy, Rental Rates & Construction
Office occupancy rate is at 89.3%, just off last year’s 90% because of new space coming to market. We have 1.7-million sq.ft. of space under construction and 2/3’s is pre-leased, a typical percentage. Rental rates are up 3.2% from last year. According to RentCafe, Dallas-Fort Worth is set to complete over 19,300 new multifamily units this year, more than any other U.S. metro; Houston 10,400, Austin 9,300 and San Antonio, 4,600 units, up 20% from a year ago. All of these Texas cities have seen an uptick this year in multifamily construction. While San Antonio had a slow down last year due to slight overbuilding, 4,600 new units should be easily absorbed in the next year.
I know that lenders are comfortable with funding new projects but the Days of Covid have driven lumber prices up considerably. Apartmentdata.com reports that in last 12 months, the Northwest Side saw the most completed apartment complexes in the area with 1,699 units, followed by Stone Oak with 1,529 units. A $200-million 3.8-m sq. ft. distribution facility has just been announced for the I-10/410 east area, probably Amazon! Couple this with the newly adopted USMCA, Toyota’s $390-m upgrade, Navistar’s just started truck manufacturing facility, HEB’s massive Foster Road distribution project, the TJMaxx 1.7m sq.ft. facility, not to mention Apple and Tesla in Austin— there is really a lot of good stuff happening here. Viva San Antonio!