In the midst of economic uncertainty and faltering consumer confidence, the San Antonio retail market remained relatively stable throughout the course of 2011. At the close of the year, the inventory of more than 45.7 million square feet of retail space posted a vacancy rate of 12.8% – unchanged from the previous quarter and slightly improved compared to 13.0% recorded at the close of 2010.
Also showing stability, asking rental rates increased two cents over the quarter and twenty-four cents compared to last year at this time to reach $18.19 per square foot per year on a triple net basis – a modest year-over-year gain of 1.3%.
Although the market was impacted by the closure of three area Borders Bookstores, retailers and restaurant operators moved forward with new leases and expansions that generated 56,423 square feet of positive net absorption in the fourth quarter led by Krav Maga World (23,000 sf) at Blanco Market, Harbor Freight (13,000 sf) at Southwest Junction and Elite Care (11,500 sf) at Countryside Plaza. In all, retail properties experienced just over 372,000 square feet of positive net absorption for the year which is significantly off the previous five-year annual average of 1.3 million square feet. The announced closing of Sears/Kmart stores is not expected to impact the Texas market but, heading into 2012, San Antonio retail properties will reflect the closure of five area RoomStore locations.
Speculative construction delivered a lean 456,000 square feet of new product led by the completion of the first phase of City-Base West (150,000 sf) featuring City-Base Cinema (30,000 sf) which opened in the fourth quarter. The vast majority of shopping center construction is primarily anchor driven and has been dominated by local grocer H-E-B which added two new stores in 2011 and is set to open its biggest location (185,000 sf) at Loop 1604 & Bandera in April 2012.
Click to read related article: San Antonio retail sector gains ground despite a daunting market (San Antonio Business Journal, 2-10-12).