San Antonio’s retail market continues to maintain a healthy balance of supply and demand, with the tight market for space resulting in a year-end 2023 occupancy of 95.0 percent and prompting a new level of rental rates for newly constructed space.
Occupancy remained stable thanks to construction dominated by users, continued retailer demand in several categories, limited retail closures and the backfilling of existing vacancies on the market.
The year-end 2023 occupancy rate is based on Weitzman’s review of a total San Antonio retail inventory of approximately 48.6 million square feet of retail space in multi-tenant shopping centers with 25,000 square feet or more.
During 2023, the failure of Bed Bath & Beyond and Tuesday Morning resulted in three new vacancies from Bed Bath & Beyond and eight Tuesday Morning vacancies. But many of these spaces are being backfilled, as detailed in the section on major leases below.
During 2023, the market’s overall occupancy showed an increase as expanding retailers backfilled a number of vacant boxes and small-shop spaces were in demand due to the limited availability of existing spaces on the market during a time of exceptionally limited new construction.
RENTS REACH NEW PLATEAU FOR NEWLY CONSTRUCTED SPACE
Thanks to a tight market for quality retail space and extremely limited new construction, San Antonio’s asking retail rental rates remain stable, and concessions such as finish-out allowances and free rent remain limited. Additionally, for key spaces in the market’s newest projects, rates have breached the $50-per-square-foot level.
SAN ANTONIO RETAIL DELIVERIES REMAIN LIMITED
For calendar-year 2023, San Antonio reported another year of record-low deliveries.
Reflecting a statewide trend, the San Antonio market is reporting limited anchor expansions via new space, with junior anchors like discounters and fitness concepts often opening in existing space. As a result, the availability of such large-format spaces is becoming increasingly limited.
Construction also has remained constrained due to factors including construction costs, which are at levels that often require higher-than-market rental rates to economically justify a project.
For calendar-year 2023, the San Antonio market reported new space deliveries totaling approximately 279,000 square feet in new and expanded retail projects totaling 25,000 square feet or more. The total is even lower than 2022’s low 380,000 square feet, 2021’s construction of approximately 354,000 square feet and 2020’s total of approximately 355,000 square feet of new space. The first four years of the current decade have added less than 1.4 million square feet to the market. The years-long trend of limited construction helps maintain a premium on existing space.
To illustrate the historic lows for the market’s construction, most Weitzman market reports during the 1990s and early 2000s consistently reported annual retail construction of a million square feet or more. For example, just 15 years ago, the San Antonio retail market added approximately 4 million square feet in new and expanded projects like Alamo Ranch, Quarry Village, Alon Town Centre and anchors like H-E-B, Target, Walmart Supercenter, Lowe’s, Dick’s Sporting Goods, Best Buy, Barnes & Noble and others.