San Antonio Finding Stability in Retail

SAN ANTONIO-Had it not been for Albertsons exiting the San Antonio market in the first half of 2002, the city’s retail real estate market would look a bit healthier, according to surveys.

When the Boise, ID-based national grocery chain abandoned San Antonio in April (it exited Houston at the same time), it left 1.3 million sf empty. The departure cut San Antonio’s retail occupancy to 85% at midyear from 86.2% at the end of 2001, according to San Antonio’s REOC Partners. That’s despite the quick hand of H-E-B picking up five stores with a total of 411,000 sf, which are to open soon under the company’s red banner.

Nine Albertsons’ stores, totaling 528,000 sf, in retail centers remain vacant as do five stand-alone stores. The stand-alone stores don’t figure in occupancy calculations, but contribute to weakness in the market “by adding vacant space which also must be absorbed,” said Kim Gatley, REOC’s director of research.

The San Antonio office of the Dallas-based Weitzman Group reach the same conclusion with its retail survey. It too blamed a drop in occupancy to 85% from 86% largely on the Albertsons closings.

If the Albertsons impact is ignored, however, the market had 120,000 sf of positive absorption in the first half of the year, REOC’s president Todd Gold said. That plus stable rental rates show that the overall market is stable, he concluded. The average rent citywide was $13.46 per sf at midyear, up from $13.35 per sf at the close of 2001.

REOC reports that big-box retailers Wal-Mart, Lowe’s Home Improvement Warehouse Inc. and Costco continue to build in San Antonio. Speculative projects also are picking up. The firm cited activity along the northern Loop 1604 including the Vineyard (at Blanco Road), Silverado Station (at Bandera Road) and Westwood (at Culebra Road).

The northwest submarket, with a 90% occupancy rate, is the city’s most active, according to the Weitzman report. The south-central submarket had the city’s highest occupancy rate, 95%.

The reports differ in their take on the future. Weitzman’s said that the combo of a stable economy, retailer demand and pre-leased construction indicate that the San Antonio market should continue the strengthening and occupancy improvements begun in 2001.

REOC, however, said it will take time to absorb the space left by Albertsons despite strong residential growth and an improving economy. “Consequently, we expect to see the market continue in this trend of stabilization through the end of 2002,” said SandraRogers, a senior associate at REOC.