REOC San Antonio
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Kim_Gatley
Kim Gatley
S
enior Vice President & Director of Research at REOC San Antonio

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REOC San Antonio Releases 3Q16 Retail Market Update

3Q16_SARetSnap.xls

Source: REOC San Antonio/Xceligent

The San Antonio retail market continues to plod ahead despite limited new speculative construction options. Although demand for retail space remains strong in the Alamo City, local retail properties experienced a slowdown in absorption as prospective tenants set their sights on recently announced projects that are preparing to enter the development pipeline.
New leases inked in the third quarter featured pre-leasing at the proposed Brooks Crossing center located adjacent to Lowe’s along IH-37 just south of SE Military in the vicinity of Brooks City Base. Hobby Lobby (55,000 sf) and Burlington Coat Factory (50,000 sf) will anchor the center which will bolster absorption figures when the project is complete. Similarly, Singing Hills, a Walmart-anchored center located at US 281 & Hwy 46 in Bulverde, is nearing completion of the first of several planned shadow retail centers. The 12,588-square-foot center is 100% pre-leased and slated to come online in December.
Looking ahead, developers are moving ahead with new projects. Culebra Commons (53,160 sf), for example, is set to get underway in the Far West sector and expected to reach completion by next spring. The two-story project is reportedly 60% pre-leased and will feature Stonewerks and Salon Suites. Also on the horizon is The Shops at Dove Creek which is slated to deliver roughly 500,000 square feet at Loop 1604 & Potranco Road in the Far West sector as well.
Meanwhile, existing retail centers ended the third quarter with 53,553 square feet of negative net absorption led by vacancy left behind by The Sports Authority at Stone Ridge Market in the Far North Central sector and Blast Fitness at Westpark Plaza in the Northwest sector. These recent setbacks may have put absorption in the red for the quarter but the market remains firmly in the black for the year with 693,589 square feet of net gain year-to-date.
At the close of the third quarter, the citywide retail market vacancy rate remained relatively stable over the quarter at 8.0% compared to 7.8% last quarter but showed improvement compared to 9.3% recorded in the same quarter a year ago. The retail market vacancy rate is expected to remain at sub-ten-percent levels through the end of the year based on the limited amount of new projects under construction and healthy demand for space by retailers and restaurants.
Despite limited new construction and healthy retailer demand for space, rental rates remained rather flat in the third quarter. The citywide average rent stepped up only $0.21 compared to this time last year marking a modest 1.3% annual increase. Of course, rental rates vary by product type and location and asking rents for top-tier shop space can reach into the $40s.
Leading investment activity in the third quarter was the purchase of Park North (635,382 sf) by Florida-based Sterling Organization. Other notable transactions included Alison’s Corner (55,066 sf), The Shops at Westpointe (18,355 sf) and a two-property portfolio including 3614 Pleasanton (30,675 sf) and 340 Enrique Barrera Parkway (50,240 sf) – both anchored by Arlan’s Market.
As the holiday season approaches, the San Antonio retail market is expected to benefit from a projected 3.6% increase in retail sales, forecasted by the National Retail Federation. This is significantly higher than the ten year average of 2.5% for holiday sales during November and December. In addition, the local economy will continue to attract and support expanding retailers and restaurants with steady population growth and a strong housing market.

Click to download REOC San Antonio’s complete 3Q 2016 Retail Market Report

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