MARKET SNAPSHOT
Development activity in San Antonio has slowed considerably, with both the number of units under construction and the volume of multifamily starts falling below the 10-year historical average. In 2024, multifamily construction starts saw a steep decline, dropping from 9,500 units in 2023 to just under 1,900 units—the lowest level in a decade. This sharp reduction signals a slowing expansion of the local apartment inventory beyond this year, providing some relief to owners and operators. The decline in new construction is expected to tighten market conditions in the medium term, with the potential for a more normalized environment beginning in 2026.
In 2024, Comal County, Far West San Antonio, and Northwest San Antonio led the metro in new deliveries, each contributing at least 2,300 units, collectively accounting for over half of the nearly 12,900 total units delivered across the metro. Looking ahead to 2025, Comal County is once again projected to see the largest nominal expansion of inventory, with an estimated 1,030 units scheduled for completion—representing a 7.8% increase in local inventory. On a percentage basis, Midtown San Antonio is expected to experience the most significant growth, with its current inventory of 4,350 units increasing by 13% as 600 new units come online this year.
As the San Antonio market enters 2025, apartment demand remains positive, with approximately 7,000 units absorbed in 2024. Demand was most concentrated in the northern submarkets of Northwest San Antonio, Comal County, and North San Antonio, which collectively accounted for nearly two-thirds of annual absorption.
The 6,845 units currently under construction reflect a significant reduction from the 15,000 units under construction just one year ago. While this reduced pipeline and lower volume of new deliveries will be welcomed by operators this year, lingering vacancies from last year’s surge in completions are expected to weigh on the market’s occupancy rate throughout much of 2025. Leasing and stabilization will take time, with the average occupancy rate projected to decline by an additional 30 basis points, settling at approximately 89.2% by year-end.
The mid-priced rental segment is expected to face the greatest challenges in 2025, with the average occupancy rate projected to decline by 60 basis points to approximately 87%. This decline is primarily driven by renters migrating to newer, more amenitized communities or opting for lower-tier properties to achieve greater affordability. In contrast, the lower-tier segment is forecasted to remain stable, as cost-sensitive renters continue to prioritize budget-friendly housing options. Meanwhile, the higher-tier segment is expected to experience a slight 20-basis-point decline in occupancy.
San Antonio’s rental market has faced headwinds from an influx of new supply over the past several quarters, with rents declining by 2.3% year-over-year to $1,246 per month at the end of 2024. This marks a stark contrast to the market’s performance just two and a half years ago, when asking rents surged by 11.5% in 2021. The high levels of construction have intensified competition, with new, amenity-rich units prompting owners and operators to offer generous concessions and competitive pricing. In supply-saturated submarkets, some landlords are offering up to three months of free rent on 12-month leases.
Rents have contracted most sharply at the high-end price point, with a 3.2% decline in Q4 2024, bringing the average rate for new leases in luxury communities to $1,427 per month—just a $180 premium over the market-wide average of $1,246. This compression has also put downward pressure on the mid-tier segment, as renters trade up to high-end properties for a relatively small cost differential. Mid-priced communities experienced a 1.8% decline in rents, with average new lease rates falling to $1,160 by year-end 2024. In contrast, the lower-tier segment demonstrated resilience, recording a 1.1% increase in rental rates during the same period. The affordability of this segment, coupled with a wider price gap relative to higher-end properties, has drawn cost-conscious renters, particularly as some households grapple with lingering inflation and seek more budget-friendly housing options.
Looking ahead to 2025, rent reductions are expected to persist across much of the market during the first half of the year. However, as the construction pipeline tapers and demand begins to catch up with supply, a modest recovery is anticipated. By the final quarter of 2025, rents are forecasted to post a slight increase of 0.9%, signaling the beginning of a gradual market rebound.
12-month period ending November 2024
San Antonio has historically maintained an unemployment rate below the national average, a trend expected to continue through 2025. The metro is projected to add 13,500 new jobs, reflecting a 1.1% increase in employment and reinforcing its positive economic trajectory. San Antonio’s relative affordability and strong local economy further bolster this outlook. As one of the nation’s fastest-growing manufacturing hubs over the past five years, the metro is poised to lead the sector with a projected 5.3% expansion by 2029. In addition, the South Texas Medical Center—a major healthcare hub—and Joint Base San Antonio continue to provide a stable foundation for economic activity, driving demand for healthcare services and military-related industries.
While the metro is not immune to broader economic headwinds, the presence of the U.S. military serves as a stabilizing force, mitigating potential downturns. San Antonio’s favorable demographics and expanding core industries contribute to an optimistic medium-term outlook. A more balanced supply-demand dynamic is anticipated, with pressures on occupancy and rent expected to ease by late 2025 and into 2026 as the recent wave of new supply is gradually absorbed.
