San Antonio Apartment Market Oversupplied, Favors Tenants

San Antonio’s apartment market is trailing behind its Texas counterparts, leaving renters with a stronger negotiating position than the city’s landlords.

While the rental market is resurging in Austin, Dallas and Houston, San Antonio continues to grapple with low occupancy due to oversupply. Its rate of 86.2 percent falls below the 90 percent that signals a balanced market, the San Antonio Business Journal reported, citing MRI ApartmentData.

When occupancy rates drop below 90 percent, renters gain the upper hand, as the oversupply creates favorable conditions for negotiating lower rents and better lease terms.

San Antonio’s rental rates fell 3.4 percent in July compared to the previous year, reversing the gains made earlier in the summer.

Furthermore, the city recorded only 314 apartment starts in the second quarter of 2024, marking the lowest level since 2000.

San Antonio’s low occupancy led to the slowdown in construction starts, according to Daniel Khalil, CoStar’s South Texas analyst. Factors behind this decline are “relatively high interest rates, negative rent growth over the past year, and modest absorption that is unable to match the pace of deliveries,” he said.

There are just 12,300 units in the pipeline in San Antonio, but those could contribute to high vacancy and set a trend for landlord concessions when they are delivered.

Texas’ other major markets are faring better, but they’re not entirely out of the woods.

Rental rates in Austin have dropped 7 percent in the past year, and occupancy has increased, aided by landlords offering generous concessions.

In Dallas, rental rates rose slightly after a 3.4 percent decline last year.

Houston stands out as the strongest performer among the major metros, with a minimal 0.6 percent decline in rental rates. Occupancy has increased since December.

— Andrew Terrell