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November 09 , 2011

San Antonio – Diverse Industries and Robust Surrounding Towns Contribute to Steady Rebound and Growth

San Antonio – Diverse Industries and Robust Surrounding Towns Contribute to Steady Rebound and Growth

By Sherman Hinkebein | EVP | Brokerage It seems like large Texas metropolitan areas like San Antonio will always serve as centers for expansion throughout Texas. The South Texas city and surrounding markets continue to hold their own during less than stellar economic times. Per the most recent Perryman report, the San Antonio area, along with a number of smaller metro areas throughout the state, are all forecasted to see healthy growth over the next several decades due to significant population gains in the top 5 MSAs. While we continue to see anxiety in most parts of the country, Texas – and specifically San Antonio - continue to have more shelter from the storm due to strong job growth, relatively good consumer spending, and an optimistic attitude of most business owners. For example, the local unemployment rate is still among the lowest in the country at 7.3%, (down from 7.5% in the Spring of this year) and the city continues to benefit from job creation. For the first half of this year, the annualized rate of employment growth reached 2.8 %. San Antonio’s retail property market segment is setting the pace for the Alamo City’s overall commercial prop­erty marketplace. Both the metrics of retail sector rental revenues and space absorption have reflected a rebound quality during the most recent nine months’ trend. Throughout the second and third quarters there was an upswing in mid-sized transactions and new leases and expansion generated approximately 250,000 square feet of positive net absorption which tightened the citywide vacancy rate to 13.0% compared to 13.4% at the beginning of the year. Neighborhood Centers, which have remained sluggish since the start of the recession, led second quarter gains – an encouraging sign and the possible start of a recovery trend. Activity within area Power Centers included JoAnn’s Fabrics (25,000 sf) at Bandera Pointe and The Village at Stone Oak signed Parmida (10,228 sf), an upscale home furnishings retailer. The recently announced closing of all Borders bookstores will darken three locations later this year including Huebner Oaks (NW), Alamo Quarry Market (NC) and The Forum at Olympia Parkway (NE) but the combined total of less than 80,000 square feet will not derail the healthy Power Center market which currently boasts an occupancy rate of 92%. Inching ahead slowly, the citywide average asking rental rate climbed fifteen cents from last quarter to reach $18.21 per square foot per year on a triple net basis – up forty cents compared to the same quarter a year ago for a modest annual increase of 2.3%. Rental rate increases, however, have not been evenly distributed across property types – while Power Centers and Community Centers reflect healthy over-the year gains, Strip Centers remained relatively flat and Neighborhood Centers recorded a slight decline. Overall, momentum is on the upswing and recovery is steady. Speculative construction remains limited but investment activity is on the rise. Notable transactions this quarter included Arbor Park (139,568 sf) purchased by Dunhill Partners and World Class Capital’s purchase of Thousand Oaks Center (69,875 sf) and Westpark Plaza (135,354 sf). San Antonio Retail Report Second Quarter 2011 The upwardly trending pace of San Antonio regional spending generally surpasses the more modest nationwide trend. Since major metro markets of Texas have exceeded the pace of U.S. job generation, it stands to reason that statewide consumer purchasing power and relative income expectations translate to higher retail spending. While regional markets may exhibit relative weakness for new construc­tion and housing sales, the nature of sales has been very broad-based, with restaurant sales, durable goods and services displaying healthy gains. In terms of the comparing theTexas market’s sales tax revenue for current market sales growth, Dallas is followed by San Antonio, then Houston, while the least strong retailing venue is Fort Worth. Austin sits in the middle. As with any country or major city having been impacted by a recession, the collaboration of all industries is what makes growth steady and real. In San Antonio, Military and healthcare continue to be major contributors to economic stability as well as long-term growth. Several other segments such as tourism, manufacturing, business services, and of course, retail, are additional generators of future economic expansion for the area. Exploration and production activity in the nearby Eagle Ford Shale is yet another stimulus to the area. Based on information from the Greater San Antonio Chamber of Commerce, the regional June Business Cycle Index Trend showed San Antonio displaying the best strength among Texas Big Five Metros. The same report showed that the San Antonio – New Braunfels area is one of the healthiest cities to come through the recent recession and is in fact leading the way in recovery.
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