Q4/23 San Antonio Retail Market Report

New Demand and Supply Trend Downward in Alignment, Keeping Vacancy Firm in Central Zones

San Antonio retail proving stable as pressure emerges. After falling to 3.8 percent at the close of 2022 — the lowest year-end vacancy on record — the metrowide rate held unchanged through the first half of 2023. This stability occurred despite net absorption decreasing on a quarterly basis in each period during the opening six months of 2023, as higher interest rates and economic headwinds began to slow retailer expansion. The reduction in net absorption, however, was offset by a deceleration in construction. Supply additions across the initial six months of 2023 totaled less than 500,000 square feet for only the third time in eight years. This pattern of moderating demand aligned with easing development is helping stabilize vacancy. At the same time, higher property taxes and insurance premiums are weighing on margins, creating additional hurdles as softer tenant demand tapers rent growth to a three-year low.