San Antonio's Multifamily Driver: Not Being Austin

San Antonio's relationship and competition with comparable cities is helping shape its multifamily market. This is particularly true with Austin — in some ways, they are sisters, with growth in one also perking up the other. But San Antonio's differences from Austin are even bigger drivers of multifamily activity.

San Antonio still has to struggle to distinguish itself against other comparable cities, Turcotte Real Estate Services' Lucio Cantu said.

But it is getting overhang from Austin's tech boom and is starting to attract new types of companies to the area, which is also changing the multifamily stock.

“Traditionally, San Antonio has been more military and a slower growth town,” Houston-based Berkadia Managing Partner Ryan Epstein said. “What’s been unique in the last couple of years is what financial services — and those types of jobs — is becoming. That’s created demand for higher-end apartment living.”

Nationwide Insurance, JP Morgan and Microsoft have all moved offices to San Antonio in recent years. USAA has bumped its minimum wage up to $16/hour to attract talent in the local labor pool. And smaller tech startups that might consider Austin office towers to be too pricey have leased up space in San Antonio’s Downtown office market, San Antonio-based Berkadia Director Will Caruth said.

“They’re defining San Antonio as the more affordable option,” Caruth said. “That’s one of the reasons you can see the apartment market catching up in Downtown. You’ve got a young employment center down there with tech startup firms and such. You’re beginning to see places like Pearl Brewery, which is the type of lifestyle facility you’ve never seen before in San Antonio. That's a place that can compete with anyplace else in the nation, as far as appeal and lifestyle.”

Like so many cities, San Antonio has been adding live-work-play options. Redevelopment of Hemisfair Park is expected to be a magnet for new development. The concept for the area is a series of urban parks, as well as an 18-story boutique hotel and a six-story office building. Zachry Hospitality now pegs the project budget at between $165M and $200M.

The project also will include an urban market and apartment complex. The goal is to create a walkable, livable urban core built around park space.

Apartment complexes in these areas, Caruth said, have taken on what is traditionally thought of as the Austin vibe: people out on great lawns throw Frisbees, couples walk dogs and eat al fresco on the square, young professionals mob weekend artisanal food events with local cheese and olive oil.   

“You’re seeing that Downtown to Alamo Heights area gentrify into a lifestyle — work and play — area,” Caruth said. “You see a lot of units coming on there, and in Southtown, because you have those drivers there.”

Despite the changes, one of San Antonio's greatest drivers is its stability.

“We don’t see a lot of peaks and valleys in terms of our cyclical market, historically,” Cantu said. “We’re pretty steady in our work. I still see that trend continuing. I still see employers coming in, but I do see some challenges to San Antonio.”

San Antonio may be borrowing a page from Austin’s playbook, but San Antonio Chamber of Commerce CEO Richard Garza cautions against becoming too much like Austin. San Antonio’s job ranks are growing and salaries are growing, but the city also has to focus on affordable workforce housing for the broad swath of middle- and lower-income residents.

“The one thing we really do need to understand is the cost,” Cantu said. “You have to make sure whatever product you do develop is in line with the market.”

Overall, the San Antonio market has been fairly stable, with a median one-bedroom at $871/month. That is attractive to smaller tech startups and the financial services industry. But the most appealing pockets are getting pricier. 

“You could find housing for less than a grand, for sure. You could find apartments for $500, $600 a month, but it wouldn’t be Downtown. It wouldn’t be at the Pearl,” Garza said. “There are areas of San Antonio that are not as robust, where we want to see that kind of prosperity. But it’s hard to do. Developers want to be building, but they need to maximize on their return on investment. That’s why the city formed its workforce housing commission.”

The Mayor’s Task Force on Preserving Dynamic and Diverse Neighborhoods, formed at the tail end of then-Mayor Julián Castro’s administration, is charged with creating inclusiveness and diversity in the city’s urban core. San Antonio needs places like Pearl Brewery for millennials, but Garza said it cannot forget its roots as a proud working-class community.

“We’re not Austin,” Garza said. “We have a different soul. We have a different feel. Consequently, we’re growing differently. We have a keen focus on workforce housing, a focus that is gaining in prominence and need.”

Downtown vs. Suburbs

CoStar data indicates Downtown San Antonio has added about 6,000 new residents since 2010, a number that is stronger and broader than the San Antonio metro area. But do not count out the suburbs.

“Clearly what’s happening Downtown is impressive — brought about by the continued transformation of Downtown into more of a live-work-play destination,” CoStar market economist Sam Tenenbaum said. “But suburbs continue to thrive, as they are closer to established job centers (UTSA, Valero, USAA) and shopping (the Rim, La Cantera and much of the growth along 1604 near the Far West Side).”

The Far West and Northwest markets also have seen recent high growth, Tenenbaum said. That is best demonstrated in apartment construction: about 75% of Downtown’s apartment units have been delivered since 2010, which Tenenbaum attributes to attractive city incentives. About half the apartment units in Far West and a quarter of the units in Northwest have been added to the city’s inventory in that time frame, roughly 15,000 total units.

The State of the San Antonio Market will be the topic of Bisnow's event Thursday morning at the St. Anthony Hotel.