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SAN ANTONIO-The economy may be slowing and tourism is down, but San Antonio’s retail market is perking along just fine due to a stable local economy and a popular regional and international trade zone, according to a new market report from Holliday Fenoglio Fowler.

The 22.6-million-sf retail market’s occupancy rate is stable at 88.9%–in fact, the rate has stayed between 86% to 90% since the mid-1990s, according to Ed Frieze, a director in Holliday Fenoglio Fowler’s research group in Dallas. In addition, demand and rental rates also are rising in the San Antonio retail market.

Several national retailers are entering the market, such as Krispy Creme doughnuts and Kohl’s, while others keep such as Costco, Lowe’s and Super Target keep expanding. “This year was really a continuation of a lot of the positive trends we saw last year, with expansions of existing retailers and a lot of new entrants to the market,” Frieze said in the report.

Last year ended with a negative 9,000-sf absorption, but that reflected some 700,000 sf in holes left by the Montgomery Ward’s and Beall’s, Frieze said. Perhaps the hottest submarket in San Antonio is the north central sector, which accounted for 38% of the 472,000 sf that was been absorbed marketwide in the first half of this year. Its five-million-sf inventory is the tightest in San Antonio with a 91.5% occupancy rate as of the end of the second quarter.

The northwest submarket’s 6.7 million sf is the second tightest sector with a 90.7% occupancy followed by the 4.1-million-sf southern tier, where occupancy stands at 87.7%. The northeast sector’s 6.8 million sf is 86% leased.

Neighborhood centers are 89.4% occupied as of second quarter while community properties have an 88.2% occupancy rate. Metro occupancy rates have gone up 11 percentage points since 1990.

About two million sf is under construction, including the 1.3-million-sf Shops at La Cantera Mall at Interstate 10 and Loop 1604, near the Fiesta Texas amusement park and the wealthy community of Dominion. The developer, Rouse Co. of Indianapolis, expects to open in early 2004. Nordstrom, Neiman Marcus, Dillard’s and Foley’s have all committed to be anchor tenants in the upscale project. “La Cantera will appeal to a combination of high-end residential market and tourists markets there,” Frieze said.

The second quarter average asking rental rate of $12.72 per sf is up 2.1% over the last year, in keeping with a year-after-year trend since 1990. The average asking price in community centers is $15.17 per sf and neighborhood shopping centers, $10.96 per sf.

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