San Antonio's Multifamily Communities Among Best In Country

Although San Antonio’s multifamily market isn’t as mature as other Texas cities, the Alamo City’s best communities can take on any metro’s properties head-to-head. USAA Real Co managing director Hailey Ghalib told attendees of Bisnow’s San Antonio multifamily event that the Residences at La Cantera surprised her team with the depth of demand and height of rents. USAA had projected about $1.60/SF but it stabilized at $1.92/SF. That’s comparable to its projects in the suburbs of Washington, DC, for example, but the Residences had much better costs.

Hailey’s second from the left here with the suburban panel at our event: ARA Newmark executive managing director Pat Jones, Legacy Alliance Holdings partner Brad DeYoung, Cadence McShane VP Dave Tague and moderator Padgett Stratemann partner Van Alston.

Another surprise at the Residences, pictured: Although USAA doesn’t design to specific age groups (it wants to be timeless and have a diverse unit mix), it expected to get a bunch of young professionals. (San Antonio has been named one of the best cities for Millennials, after all.)

Instead, only 30% of the Residences’ residents are Millennials. That’s the lowest in Hailey’s portfolio; most are more like 60% full of young adults. Gen X took dominance instead; the average age is 38. USAA is under construction with the second phase of housing at La Cantera (called Celeste at La Cantera). Hailey says it’s adding amenities and working hard to make it different from the Residences.

Brad says luxury has meant higher-end finishes for many projects (although luxury means something different for each submarket), but there comes a point that all you can do is up the experience.

Legacy Alliance is focusing on service-oriented amenities, including at Villas at The Rim. Brad says it’s harder to target demographics now for your design. Renters by choice can be anyone, and their desires for properties are very different. Millennials want smaller units, but Baby Boomers want an apartment more like a home with more space, more closets and a very usable kitchen.

Pat agrees with Hailey that San Antonio’s multifamily market hasn’t matured yet, but says the product here is so great that institutional and international investors love it. That’s pushed sales to a peak: In 2015, $1.4B of apartments traded in the Alamo City, and they’re usually getting 5% cap rates or lower.

The metro recorded 5% rent growth last year and has been getting 3% to 5% each of the last five years. The 11,000 units in the pipeline have some worried, but they’re spread out so that deliveries are being matched by demand. (In 2015, we delivered 5,500 units and absorbed 5,500 units.) In-migration and employment are as good in San Antonio as anywhere, so he expects fundamentals will continue to improve.

Dave (snapped with colleagues Will Hodges and Kevin Cummings) says the trend to higher-density communities is affecting construction time and cost. Subcontractors would rather work on garden-style properties, which are logically easier piece work, so they may crank up prices for mid- and high-rises. Available labor hasn’t really recovered and neither have construction costs, but there are fewer projects underway. That’s helping the bidding pool; two years ago, you’d be thrilled to have two or three subcontractors bid your project, now you’ll see six or seven.