Walmart Drives Retail in San Antonio

SAN ANTONIO—Area consumers gained four new Walmart Supercenters in 2013, and five more are nearing completion and scheduled to open in the next few months. Two or three more are expected to break ground later this year.

At the same time, two new Sam's Club stores will be opening in the first quarter and Walmart's new Neighborhood Market concept stores are slated to open this year with three locations announced and more expected.

“There is no doubt that Walmart is the dominate force driving growth in the San Antonio area right now,” says Kim Gatley, SVP and director of research for REOC San Antonio, a locally-based, full-service commercial real estate company.

Meanwhile speculative development has remained very limited but, in the final quarter of 2013, new construction delivered two new projects both located in the Northwest sector. Helotes Town Centre is an example of growth stimulated by the adjacent Walmart that opened earlier in the year.  Pre-leasing activity in the 50,000-square-foot Helotes center includes Great Clips, Cash Store and Marco's Pizza.  Dominion Ridge is a two-story retail project located along the I-10 corridor. The 56,844-square-foot project, which sits adjacent to an existing CVS Pharmacy and Chase Bank, came online with a tenant line-up that includes two restaurants – Silo and Aldaco's – as well as several specialty retailers.

“Although not huge projects, these two new centers mark the delivery of San Antonio's first sizeable speculative retail properties in over a year,” adds Gatley.

Pre-leasing activity at the newly completed projects along with other new leases and expansions inked between the first of October and the end of December generated 164,904 square feet of positive net absorption in the fourth quarter, according to the survey of nearly 47 million square feet of retail lease space across the greater San Antonio area.

REOC notes that with little new product to offset net gains, the San Antonio retail real estate market vacancy rate dropped to 10.3% in the fourth quarter of 2013 - down from 10.7% recorded in the previous quarter and improved compared to 11.7% recorded in the same quarter the previous year.  In fact, the San Antonio retail market vacancy is the lowest it has been since the third quarter of 2005. 

The average quoted rental rate for San Antonio retail space ended the fourth quarter at $16.60 per square foot per year on a triple net basis, up $0.37 over the previous quarter and $0.81 compared to the same quarter the previous year for a noticeable annual increase of 5.1%.

Vacancy and rental rates vary by location and product type, the firm reports. On a year-over-year basis, citywide average rents increased across the board and all property types either maintained or improved vacancy rates.  Power centers, for example, experienced 63,936 of positive net absorption in the fourth quarter which tightened vacancy to 5.9% compared to 6.4% recorded last quarter and stable compared to 5.8% recorded a year ago.  In the Northwest sector, more specifically, vacancy within Power Centers stands at an incredibly tight 2.2%. 

After remaining relatively slow for most of 2013, investment activity picked up in the last few months of the year.  A partnership between USAA Realco and Cencor Realty purchased the H-E-B anchored Culebra Market Shopping Center (232,126 sf) located at the intersection of Loop 1604 & Culebra Road. 

Looking ahead, REOC expects that the pipeline of new construction will continue to be dominated by big-box retail led by Walmart.  The discount giant plans to break ground on an 180,000-square-foot Supercenter at Singing Hills – a 250-acre mixed-use, master-planned community in Bulverde and another 189,000-square-foot store in Cibolo.  H-E-B will also bring a new store to the Far North Central community of Stone Oak at Hardy Oaks & Wilderness Oak and has announced plans to replace its oldest San Antonio store with a new two-story supermarket at 1601 Nogalitos just north of Highway 90 on the city's Southside.  In the Northeast sector, Garden Ridge Pottery is nearing completion of a new store at Gateway Plaza which is located at Loop 1604 just west of Interstate 35 and, in the Northwest sector, TopGolf announced plans to deliver its 65,000-square-foot facility. 

“Improved vacancy and steadily rising rental rates will prompt plans for more speculative retail with new Walmart store locations providing shadow-center growth opportunities but developers will likely remain cautious and seek to land anchor tenants prior to kicking off construction,” says Brian Harris, SVP/Partner, REOC San Antonio.  Such was the case with the most recent groundbreaking of Sonterra Village located at the northwest corner of Loop 1604 and Sonterra Place where Trader Joe's will open its second San Antonio store joined by additional retail and restaurants. 

Activity reported late in the fourth quarter will bring new and expanding retailers to the market such as H&M to fill 27,000 square feet at The Shops of La Cantera and Dick's Sporting Goods to fill 50,000 square feet in the former Mervyn's space at South Park Mall.  This will help carry momentum into the first quarter of 2014, REOC says.