Building is now running at a high level in the 149,850-unit San Antonio apartment market, but leasing is still running faster. The vacancy rate fell to 6.5% in the second quarter of 2012 on 450 units of net absorption, which brought the 2012 total to 1,025. The rate was 6.7% in July after a surge of new supply, but net absorption at 3,865 for all of 2012 is expected to drop the rate to 6.1% at year-end—despite 2,500 new apartments completed. The respective Class A and B/C vacancy rates for the second quarter were 6.0%, down 80 basis points year-over-year, and 7.0%, down 120.
Demand has been strong since 2009 but new supply, slowed at first by the financial crisis, is starting to catch up. Reis reports 675 units completed in the first half of 2012 and 652 more added by September. That left 1,966 under construction with announced completion dates by the end of 2012 and nearly 4,000 being built for later delivery. Both new supply and net absorption are forecast at more than 3,700 in 2013, keeping the vacancy rate steady, but the rate is forecast to eventually trend close to 5.0%.
Rents aren’t spiking, but they continue to accelerate. In the second quarter of 2012 the average asking rent increased 1.0% to $748 per month, while the average effective rent rose 1.3% to $716 per month. The year-over-year increases were 3.2% and 3.8%, respectively. The respective Class A and B/C asking averages were $878 and $632 per month, up 1.3% and 0.8% during the quarter. An additional increase in overall rents of 0.2% by both measures was recorded for July. Reis predicts asking and effective rent increases of 3.8% and 4.5% for all of 2012, down from earlier expectations, with similar but generally larger annual increases forecast for the following few years. Since there was little if any rent decline here during the recession, rents are already well into record territory.
ALN Systems reports a vacancy rate of 7.6% in August, down 80 basis points from a year earlier, and an effective rent of $780 per month, up 5.9%.