Demand for San Antonio retail growing
SAN ANTONIO – Demand is growing for retail assets here, according to Marcus & Millichap’s third-quarter 2015 market report.
High-quality, multitenant assets are drawing the strongest interest, and bidding for these properties is intensifying. As demand for these centers continues, Marcus & Millichap said investors will begin to close the gap between Class-A and B assets.
Cap rates for high-quality retail centers are around 7 percent, while a Class-B center will trade approximately 50 basis points higher.
Construction will remain limited to mostly single-tenant product this year, creating new opportunities for investment and further fueling the number of sales for these properties. Buyers will continue to target single-tenant investment opportunities, and cap rates will remain on par with other Texas metros in the mid-to-high 6 percent range.
Among the firm’s other projections for the remainder of the year:
- Building contractors will complete 700,000 sf of retail space this year, less than half of the 1.6 million sf delivered in 2014. Most of the development is occurring in the northern portion of the metro, which is also ripe with home construction and employment expansion.
- Demand will keep pace with supply additions this year. Average retail vacancy will dip 10 basis points from the end of last year to 5.8 percent. In 2014, vacancy tumbled 20 basis points on net absorption of 1.7 million sf.
- As vacancy remains at constricted levels, the amount of quality space available for lease is diminishing. As a result, the average asking rent will rise 1.7 percent this year to $15.20 per sf. The average rent grew 0.9 percent last year.
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