Scott Ball / Rivard Report
San Antonio may be as comfortable as an old pair of jeans, as U.S News & World Report recently defined the city. But as investors grow more interested in the commercial real estate market here, that description could start to feel a little snug.
The Urban Land Institute recently released its Emerging Trends in Real Estate Markets to Watch report showing San Antonio in 32nd place on the list of 78 cities rated for their overall real estate prospects. Austin came in first for the first time, overtaking second-place Dallas/Fort Worth. Houston is at number 40 on the list.
The rankings, based on a survey of investors, show which markets are most attractive to buyers and companies looking to settle here. San Antonio broke into the top 25 for the first time last year.
Falling out of the top 25 sounds worse than it is, said Gardner Peavy, regional partner in San Antonio for Peloton, a commercial real estate company with offices in all four major Texas cities.
“Being on that list is a big feat for us as a city. Before, San Antonio wouldn’t even show up,” Peavy said. “But this is just a snapshot in time of the institutional investors’ sentiment relative to their view of other markets. Nashville, for example, wasn’t even on their radar five years ago, and now it’s one of the hotter cities in the country. Them moving up probably pushed us down [on the list].”
But at a local panel discussion about the survey in January, when investors were asked why their sentiments about San Antonio may have changed, their response had to do with the city’s lack of a corporate base.
“It makes our market a riskier investment for the institutional investor,” Peavy said. “It makes capital more at risk from a jobs standpoint.”
Education was another issue.
“If you look at San Antonio for what jobs can be filled based on the education level of the community, it’s a factor for us,” he said.
Two of San Antonio’s Texas neighbors are at the top. Peavy calls Dallas the big winner for attracting major corporations from California and elsewhere, and Austin’s tech sector continues to boom.
“We’re not getting any of that [investment] because our workforce isn’t to the level to take those jobs yet,” Peavy said. “Are we going to benefit from that? Absolutely. It will eventually become too expensive [in those cities], and the nearby cities will benefit.”
A recent surge in tech-company interest in San Antonio, with smaller-tier companies looking beyond Austin in terms of price point and labor pool, is a sneak peek into that future, Peavy said. The quality of life San Antonio offers is attracting attention.
“We have a huge advantage in that story over the other cities,” he said. “That’s probably our way out of that circular lack of corporations and education thing. Somebody [could] pioneer here and break this circle – move here and take advantage of the quality of life, and the rest will work itself out. We’re probably seeing that more in the tech space now because they are forward-thinking people, so they are pioneering to do that. We’ll probably see it follow in the corporate space.”
On this year’s U.S. News & World Report Best Places to Live report, San Antonio came in 23rd, cited for its “relaxing and inviting atmosphere.” Dallas-Fort Worth took 15th place on the list and Houston 20th. But Austin knocked Denver out of the No. 1 spot.
In 2016, the San Antonio Economic Development Foundation (SAEDF) worked with 26 new company locations or expansions in San Antonio and Bexar County, and $1 billion in capital investment.
“Over the next five to 10 years, as our community experiences transformational growth, we want to maintain our rich culture and keep improving upon it as we propel San Antonio to a position of global competitiveness,” said Jenna Saucedo-Herrera, SAEDF president and CEO.
The market watch report also put San Antonio at 23 on a list of 78 cities for “homebuilding prospects,” and places the city in the “improving” category for investor demand.
“All the public improvement efforts our city has made the last 10 years has been very forward thinking, and we are getting the benefit of that in conversation outside of San Antonio just tooting its own horn,” Peavy said.
“Austin tech companies are saying, ‘Gosh, I love the fact that we moved our business to San Antonio – it feels like Austin used to. You have great parks, great things to do.’ That’s a hard sell at the beginning. You’re spending so much money on play things.
“But it is such an important investment, and it’s one of the main offerings we have as a community. You go to any other city in Texas and they don’t have the interesting landscape we have. And it sells.”