Apartment Demand Soars in San Antonio Suburb

As declining demand and rents continue to plague San Antonio’s multifamily market, the northwest suburbs are bursting at the seams with apartment dwellers.

Apartment occupancy in this emerging submarket, particularly along Interstate 10 in the Texas Hill Country, soared by 15.4 percent year-over-year in May, the San Antonio Business Journal reported, citing MRI ApartmentData.

Rents in the area have risen by 8.2 percent over the past three months, although that rent growth figure is annualized and reflects a more modest 2 percent increase over that stretch.

The driving force behind the submarket’s multifamily boom is Boerne, a town of roughly 20,000 people.

“Most of that growth is concentrated in Boerne,” said Bruce McClenny, an analyst with ApartmentData. “There’s hardly anything going on between Boerne and Kerrvile, and there are some small apartments in Kerrville.”

The newness of the market has contributed to high occupancy rates, as limited supply meets pent-up demand, McClenny said.

The Hill Country has one Class A apartment complex in its lease-up period with a 58 percent occupancy rate. Stabilized occupancy for Class A properties is at 88.5 percent, while overall occupancy, supported by a strong Class B market, stands at 91.5 percent.

In contrast, San Antonio’s apartment market is grappling with record-high deliveries, leading to a lower occupancy rate of 86.5 percent, below the 90 percent threshold that typically defines a seller’s market. McClenny noted that 14,450 apartment units are under construction in San Antonio, with 4,467 units already delivered this year. The market is expected to match or exceed the 10,600 deliveries in 2023, driven by low interest rates and a perceived high demand for housing.

San Antonio’s rental market has seen a 4 percent decline in annual rent growth, which has rebounded to 2 percent annualized growth over the past three months. To attract tenants, 60 percent of Class A apartment landlords are offering incentives like one month of free rent, the outlet reported.

—Quinn Donoghue