SAN ANTONIO – Rental rates are cratering in the San Antonio and Austin markets, with no indication of when they will bottom out.
Both cities' construction pipeline began to swell during the pandemic, with developers eager to cash in on the frenzied demand for more housing.
Recommended Videos
Since 2022, mounting interest rates and return-to-office mandates tempered demand, and market conditions quickly shifted.
As record rates of new product began to hit the market in the Alamo City and the Texas capital, asking rents diminished, shrinking commensurate with landlords' inability to fill their empty units.
Over the past year, San Antonio delivered 14,500 units in the past year, only absorbing 7,630 according to MRI ApartmentData, a real estate analytics firm.
In January, the average asking rate for an apartment in San Antonio was $1,168. That’s a 5% decline from its $1,230 two-year high in July and August 2023.
Rental rates rallied this past summer, but that was met with increasingly declining occupancy rates. Since August 2024, rates have been on a downward slide, with occupancy notching its way back above 86%.
That’s spelled troublesome news for the 9,000 units currently under construction in San Antonio, and serves as a potential warning for the 16,700 units proposed.
The problem is similar in nature but more compounded in Austin, where the current average rental rate is $1,435, down a shocking 12.5% from the $1,640 two-year high it posted in June 2023.
The city has recently opened 36,000 units opened over the past year in Austin, only around 19,000 have been absorbed.
While MRI’s data shows occupancy rates have rallied since their July 2024 lows just above 83%, the current rate of 84.1% is not a significant improvement.
The Texas capital is also looking at 16,500 units currently under construction with another 36,000 units proposed.
Neither city is above the 90% threshold that typically divides a seller’s market from a buyer’s market, forcing landlords to compete for tenants. 70% and 72% of Class A properties in the San Antonio and Austin markets respectively are offering concessions of more than 10%. That means most newly built properties are offering around a month — or more — off regular rates.
While Dallas and Houston are also negotiating hefty construction pipelines, with 84,000 units proposed in Dallas and just shy of 40,000 units in Houston, both cities are only around 55% of their Class A products are offering concessions. Even then, concessions in Dallas average 9.2% while Houston posted 8.7%.
Read more of this story at the San Antonio Business Journal website.
Editor’s note: This story was published through a partnership between KSAT and the San Antonio Business Journal.