Overall, San Antonio’s commercial real estate market remains strong with both transaction levels and deliveries to the market seeming to pick up slightly in the last month or so, significantly spurred by growing San Antonio demographics. Even in the current environment of overall uncertainty across the country, San Antonio is forecasted to maintain growth for the foreseeable future and very likely poised for even stronger growth as lending and inflation pressures retreat.

A common question many would-be sellers are asking, is “Why would I sell now?” The thought of purchasing a new home and replacing their current (likely lower) fixed interest rate for one twice that amount (or more) now has limited the housing supply in many submarkets throughout San Antonio. The 2021 to 2022 seller’s market is over and the divide between sellers’ and buyers’ expectations on price has caused the average days on market (DOM) to increase by approximately 80%. We are also seeing the terms “back on market” or “price change” on listings more often, which is a further indication of the balanced seller/buyer market.

We forecast that the San Antonio housing market will continue to outpace most areas of the country due to the strong job growth and population increases. Fluctuations in interest rates will continue to play a pivotal role. If rates remain stable or decline slightly, we expect tremendous activity for refinance and purchase transactions. If rates continue to increase, which is less likely, we could see another 6-12 months of moderate conditions similar to pre-pandemic norms.

Given the pronounced decrease in the aggregate count of commercial real estate transactions, industrial properties have displayed remarkable resilience against the impacts stemming from the recent Federal Reserve interest rate hikes. We continue to see several bid requests for purchases. Speculative construction is still active in some industrial parks, namely in the West Houston market. Furthermore, we have seen some relief in construction costs.

Multifamily had a decent leasing rebound in the first half of 2023. Net absorption was negative in the second half of 2022, the first time since 2009 that Houston had two consecutive quarters of negative demand. Houston was 2^nd place behind West Palm Beach in average insurance premium increases – 45% for Houston. Multifamily properties in Houston are not immune to the recent decline in sales activity.

According to the April 2023 Texas A&M REC Spotlight Report, average sales prices dipped 12.89% year over year from $679,290 to $591,761, while the average price per square foot subsequently declined from $334.97 to $276.77. Additionally, the median price declined 15.14% year over year from $550,000 to $466,705 and the median price per square foot declined from $286.25 to $233.70.

The Austin retail market continues to witness healthy operating conditions and is outperforming other markets nationally. The fast growth of the suburbs and one of the best-performing job markets in the country have encouraged retailers to expand in the market.

The Austin office market continues to see an increase of sublease space available, surpassing 4.6 million square feet per the most recent CBRE report. Vacancies sit at 20.6% with an average gross lease rate of $47.89/sf, which is up from the previous quarter.

In a recent survey, one participant interviewed stated that there is adequate liquidity in the market and deals are still getting done, albeit with new underwriting guidelines. Additional interviews with market participants indicate that buyers in the commercial real estate market have increased leverage and the market has become more balanced after a lengthy seller’s market.

Overall, demand for commercial property in the DFW area remains strong (relative to major metropolitan areas outside of Texas) due in large part to ongoing inbound corporate relocations.

Throughout 2021 and most of 2022, brokers routinely commented on the lack of “good” inventory which was likely a catalyst for the massive price and value increases in the Texas land markets. However, inventory levels appear to be trending towards pre-pandemic levels. Buyer demand for most recreational properties has continued to focus on properties with scenic attributes, proximity to major demand centers (Austin, Houston, DFW or San Antonio), and of course, water. Properties with live or significant surface water are a “first-choice” for discerning buyers and command a significant premium.

Most land regions in Texas have experienced lower overall sales volume but higher priced land values. West Texas is the one exception with very limited measurable sales activity. Properties near the United States-Mexico border have experienced significantly less interest and activity, which will likely result in downward pressure on prices.