Not as Acute for Greater San Antonio

Final Thoughts

Two things can be true at once: the San Antonio new construction pipeline is not as bloated as in many markets around the country, and also San Antonio is likely to be dealing with new supply pressure this year and next year.

rently under construction that are not yet leasing. These units will be entering the market during the remainder of 2023 and in 2024.

Upcoming Deliveries Set to Increase

In addition to almost 10,000 units in lease-up, there are close to 14,000 units currently under construction but not yet leasing. Submarkets like the Downtown – Riverwalk area and the La Cantera – Dominion – The Rim region are among the leaders in this phase of the pipeline. Indicating the geographic dispersion of activity, however, is the fact that Greater New Braunfels leads the way with nearly 2,000 units currently being built. The Northwest – Helotes – Grey Forest submarket is also an active one with around 1,200 units in this phase of the pipeline.

Removing the outlier years of 2021 and 2022, the three-year average for Greater San Antonio annual absorption in the 2018 through 2020 period was 5,600 net units. Based on projected start dates, 2023 deliveries are anticipated to be between 7,000 and 8,000 units.

The resulting shortfall relative to average demand is probably a bit understated since 2023 net absorption is unlikely to hit that average. In fact, first quarter net absorption totaled a net loss of around 600 leased units. While the fourth and first quarters tend to be the weaker season for multifamily, San Antonio usually does not see negative quarterly absorption in the opening period of the year. In recent years, only 2022 met that ignominious threshold.

The bigger problem facing the multifamily industry in San Antonio is the demand picture. While national demand fell more than 90% in 2022 relative to 2021, San Antonio was among those markets that experienced a net loss of leased units last year. So far in 2023, that trend has continued.

Units in lease-up and projects that have already broken ground represent new supply that cannot be put on hold or otherwise avoided. Slightly more than half of the total pipeline currently sits in a pre-construction phase, meaning those projects can be canceled or delayed. But any winnowing of that phase would not be felt in the market until late 2024 at the earliest, and really, not until 2025.

The sky certainly is not falling in San Antonio, especially relative to other markets. Nonetheless, expect to see concessions on the rise, market-level occupancy further softening, and rent growth become harder to come by. The near term will be more challenging for operators and developers than they have become accustomed to as the market takes time to adjust to the incoming new units.