Apartment renters soon could see relief after more than a year of extreme growth in rent costs in San Antonio and across the country. 

The average apartment rent in San Antonio during 2022 rose to $1,200 as the cost of rent grew by 15.5% in 2021 and at the start of 2022.

That’s an “unheard of” amount for the area, said Cindi Reed, director of sales at the market research firm Apartmentdata.com. Reed spoke about the state of the multifamily industry Tuesday to members of the San Antonio Apartment Association, a trade association representing local property owners and management companies.

By comparison, between 2010 and 2019, rent costs grew by an average 3.7%, with very little difference between the number of new apartments hitting the market and the number being rented.

That all changed in 2021, an era of government stimulus payments and rising consumer confidence after the economic shock at the start of the COVID-19 pandemic in 2020.

“Everything was extreme — we were just riding this wave in 2021,” Reed said. “Prices kept going up. Renters were just paying whatever was asked.”

During the last half of 2022, however, rent prices began to level off. Interest rates started to climb forcing potential homebuyers to remain renters which puts pressure on rent prices and slows multifamily investment activity.

Occupancy levels, which also rose in 2021, fell 2.7% by December of last year. “Everything’s just kind of stopped,” she said. But the trend could be a sign that normalcy in the rental market is on the horizon.

Rent costs are expected to grow by only 2% to 3% in the coming years even with a looming recession, said Will McIntosh, global head of research at USAA Real Estate Group. 

In cities like Austin and Orlando, where rent prices grew by over 20%, accessibility has become an issue, McIntosh said. “At some point, you’re pricing yourself out of the market” so tenants can’t afford to rent and begin to look for other housing alternatives.

This graph shows annual rent trends in the San Antonio apartment market.
This graph shows annual rent trends in the San Antonio apartment market. Credit: Courtesy / San Antonio Apartment Association

Negative absorption rates 

The industry also is keeping a close eye on what it calls absorption rates. Absorption is the number of units occupied in the market over time and takes into account both construction of new apartments and the removal of existing units.

The rate reflects trends in supply and demand and thus, the health of the industry. 

In San Antonio, the 2021 absorption rate nearly doubled as demand for apartment housing outstripped supply. Then, last year, the absorption rate dropped into negative territory, indicating declining demand as almost 6,000 new units were built.

“We all are watching absorption because if we’re overbuilding, that’s a problem,” Reed said. 

This year in San Antonio, more than 7,200 new apartments will be completed and ready for lease, the largest number of units delivered in one year since 2017, Reed said. That’s concerning as it follows a negative absorption rate at the end of 2022 while many pandemic-era tenant protections like eviction moratoriums and rent freezes have ended.

Construction continuing

From downtown towers to suburban apartment complexes, multifamily construction is going on throughout the city. Most of it is centered in far Northwest San Antonio — along U.S. Highway 151 and the SeaWorld area, Reed said. 

There, more than 1,200 apartments were completed in 2022 and another 1,000 are coming online in 2023. Rent prices went up by 6% last year, according to the data Reed presented.

The other areas of town with the largest apartment growth include Thousand Oaks/Stone Oak/U.S. Highway 281 North; New Braunfels and Seguin; Leon Springs, Boerne, Kerrville; downtown, Southtown and Brackenridge; and Windcrest and Universal City. 

Almost 1,500 units are under construction downtown, and rent costs in the center city have begun to drop slightly, by .3%.

Rental perks to increase

Reed also monitors trends in concessions offered by landlords in order to gauge the state of the industry.

In a slower market, renters can benefit from concessions — reduced prices and other benefits that property managers and landlords use to attract renters and get them to sign leases.

The percentage of Class A properties — the newest and most expensive apartment properties — offering concessions in 2021 dropped to 26% from 63% in 2020, Reed said. In 2022, that figure rose again to 41%.

With a total of 7,300 units ready for move-in during 2023, Reed expects the number of properties offering concessions to reach 63% in 2023.

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Shari Biediger

Shari Biediger is the development beat reporter for the San Antonio Report.