Multifamily Market Shows Signs Of Weakening

SAN ANTONIO-Demand for multifamily housing is weakening from the strong demand of 2000 in San Antonio as the rate of job growth slows and companies cut workers lose, according to a third-quarter report by multifamily advisory firm Hendricks & Partners. The occupancy rate was 4.7% in the third quarter, down from 5.5% in 2000.

The Hendricks report warns that vacancies are expected to increase because of weaker economic conditions and a large number of new units in the construction pipeline.

Moreover, rent growth has been sluggish. Year-over-year, rents rose 3.1% to an average of $587, but rents were unchanged from 2001′s second quarter to the third quarter. The biggest rent jump was 5.1% in Central San Antonio.

The Hendricks report says job growth has slowed to 1.7% from 2.1% in 2000. Additionally, companies, including such as large employers USAA and SBC Communications, have cut hundreds of jobs. It notes American Airlines, AT&T and Weblink have closed call centers in San Antonio.

The report says weakening demand is reflected in the absorption of 2,703 units through September, down from the 4,822 absorbed in 2000. During the third quarter, absorption dropped to 714 units from 929 units in the third quarter in 2000.

San Antonio developers have 2,488 units under construction with another 2,761 units recently approved or submitted for approval. Most of the new development is in the northern submarkets. The reports says developers are “showing more restraint,” with 70 multifamily permits issued in the third quarter, compared to 332 permits issued in the 2001 third quarter.

Concessions are rising with 55% of properties offering incentives, up from 53% last year. Newer apartment complexes, offering the heaviest discounts, sometimes exceeding two months free rents on one-year leases.

Sales of apartment properties have slipped to 20 sales through September down from 23 through September 2000. The price per unit, however, has increased to $40,285 from $36,185 and the per-sf price has risen to $48.29 from $44.07.