In the midst of the coronavirus pandemic, San Antonio's housing market is booming.
Fueled in part by
But a rise in foreclosures is also looming, as people thrown out of work by COVID-19 struggle to make their mortgage payments.
Another corner of the real estate market could undergo a transformation next year. In the office sector, when and how employees will return to their desks is still an unanswered question for many firms. With decisions to make about remote versus in-person work, executives are evaluating how much space they'll need.
Those who are returning to the office are coming back to reconfigured spaces, with partitions, spread-out work stations, touchless controls and other safety measures.
Housing's hot streak
Home sales in Bexar and surrounding counties have risen for six consecutive months, according to the latest report by the San Antonio Board of Realtors. Construction of new homes is also surging.
The jump in demand, along with a dearth of new listings, is pushing up prices, making it more difficult for buyers hunting for lower-priced homes.
"It's been a very strong market this year," said Jim Gaines, chief economist at the Texas Real Estate Research Center at Texas A&M University. "I think it's going to continue, at least into the first half of the year."
But Gaines also expects an increase in foreclosures in 2021, as families thrown out of work grapple with payments. Companies rehiring workers could help mitigate the financial strain.
The San Antonio area's unemployment rate rose to 7.8% in November and its job growth rate of 1.4% is much lower than Texas' 4% rate, according to the Federal Reserve Bank of Dallas.
"We expect very weak jobs activity in Texas over the next couple of months, but as the vaccination starts to spread and people become more comfortable, we're going to see a return to pretty healthy growth," Keith Phillips, Dallas Fed assistant vice president and senior economist, said recently. "But not enough to recover all the jobs lost, so we think we'll end the year (2021) below pre-COVID levels."
Unlike with the avalanche of foreclosures during the 2008 recession, people have more equity in their houses now and could sell, Gaines said.
San Antonio has a "relatively high proportion" of homes financed with Federal Housing Administration and Veterans Affairs Department loans, which are "probably the most vulnerable properties," Gaines added.
More apartments
Assistance programs, eviction moratoriums and rent specials are helping keep apartments across San Antonio full.
Across the region, the average monthly rent increased 0.4% to $984 from March to November, said Cindi Reed, regional vice president at ApartmentData.com. Average prices have risen at luxury complexes but fallen at older properties with lower rents, and downtown San Antonio and neighborhoods around it have seen the biggest declines.
The average occupancy rate was nearly 92% in the fourth quarter of 2019 but is expected to decline 1.5% this winter, according to a report by ApartmentTrends.com. Rents are also projected to drop 1.2 percent.
"The market has remained steady through the pandemic, and this is due in part to rental assistance provided and the moratorium on evictions," founder and owner Robin Davis said. "However, during the fourth quarter, we are now seeing concessions increase, eviction notices being posted, and rents and occupancy dropping."
About 5,000 units are expected to be finished in 2021, Reed said. A whopping 61 projects with nearly 18,000 units are proposed in the region, though it's unclear whether those plans will ultimately pan out.
"I would imagine that many of them are going to wait and see what happens with this pandemic and the vaccine being released and so forth," Reed said. But San Antonio is "performing well" and steadily absorbing units.
Davis of ApartmentTrends.com said nearly 6,900 new units have been added this year and another 8,851 are under construction. A bevy of new projects coupled with rising unemployment "have great potential to create a further slide in the local apartment market," she said.
Offices in 2021
San Antonio's steady office sector heading into 2020 was, in retrospect, a boon.
"We're not typically overbuilt nor were we entering into the pandemic, which now is working in our favor," said Russell Noll, executive managing director at Transwestern. "We don't have a lot of excess inventory on the market."
The vacancy rate stood at 9.2% in the third quarter, up from 8.8% in the first quarter and the five-year average of 9%, according to the most recent report by Transwestern.
The market posted a negative net absorption of 40,356 square feet, meaning more space was vacated than was filled. But it has registered positive absorption of about 326,888 square feet over the last year, the firm noted.
The pandemic and the presidential election created uncertainty, causing firms to pause and take stock of their workspace, Noll said.
For example, some companies are opting to extend leases for a year instead of three to seven years. Others are redoing their offices or trying to figure out how to do so.
When putting out requests for proposals and speaking with landlords, Noll said, there's new terminology around air purification, cleaning common areas and other safety protocols.
"That's a whole new language ... that I've never seen," he said. "Because it is a concern."
It's too soon to tell just how many employers in San Antonio will scale back, expand their space or even forgo offices altogether. Questions remain about how remote work is affecting employees' mental health, productivity and collaboration.
"I think most companies are going to have an element of flexible work," Noll said, meaning employees could come into the offices some days and work from home other days. "I think you're going to see a continual reassessment of how the interior space is going to be laid out."
As for whether office projects in the pipeline will proceed, it depends on which stage each is in. For developments that have yet to break ground, "I think you'll see them pause for a while," Noll said.
