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SAN ANTONIO-The San Antonio-area apartment continues to improve through 2002 despite renters being lured into home ownership by low interest rates as new research by Hendricks & Partners shows better vacancy rates and absorption levels.

Move-ins outran move-outs, according to Hendricks, as 1,138 units were absorbed in the third quarter, a 59% increase over the 2001 third quarter absorption level. While there was year-to-year improvement, the cumulative total was negative absorption of 687 units.

New construction, however, seems to have calmed to what Hendricks called a “reasonably constrained” third quarter, with deliveries totaling 260 in comparison to the 1,083 built in third quarter 2001. Third quarter permit activity jumped to 891 units from a paltry 70 in the previous year. Despite that third-quarter surge, Hendricks does not expect the 2002 total to exceed that of 2001.

While the market’s vacancy rate clicked up to 5.2% from 4.7% the year before, Hendricks noted that the vacancy rate remained a positive indicator by dropping for the third straight quarter. The lowest vacancy rate was in the suburban New Braunfels/Seguin submarket, which posted a 3.9% rate in the quarter, down from 4.3% last year.

Befitting its vacancy levels, the New Braunfels/Seguin submarket posted the biggest gain in rents with a 7.4% rise from the 2001 third quarter. The submarket’s average of $670 per month is the highest in the market. Overall, the market’s average rent rose 3.1% to $606 monthly.

Concessions persisted throughout the market, according to Hendricks, with 51% of properties offering free rent and other inducements. Among class A properties, 81% offered concessions.

Sales activity ratcheted up with 26 sales through three quarters compared to 20 in the same period in 2001, according to Hendricks. Most of the 2002 sales, however, were of complexes built in 1984 or earlier. Overall, the price per sf rose to $50.83 from $48.29, but the average price per unit fell to $39,777 from $40,285.

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