The real estate market in San Antonio is booming amid the coronavirus pandemic.
Fueled in part by low interest rates and a shortage of available homes, sales and prices soared in 2020 after an initial slowdown in the spring and are expected to continue to rise in early 2021. Renters are choosing to buy and homeowners are looking for more space.
But foreclosures are also on the rise as those unemployed by COVID-19 struggle to make their mortgage payments.
Another corner of the real estate market could change over the next year. In the office space, when and how employees return to their desks is still an unanswered question for many companies. Executives decide how much storage space they need to make decisions about remote or personal work.
Those who return to the office return to newly configured rooms with partitions, distributed workstations, touchless controls, and other security measures.
The hot phase of housing
Home sales in Bexar and the surrounding counties have risen for six months in a row, according to the latest report from the San Antonio Board of Realtors. The construction of new houses is also increasing.
The surge in demand and the lack of new offers are driving up prices and making it difficult for buyers to look for cheaper homes.
"It's been a very strong market this year," said Jim Gaines, chief economist at Texas Real Estate Research Center at Texas A&M University. "I think it will continue at least in the first half of the year."
But Gaines also expects foreclosures to increase in 2021 as families who are out of work struggle with payments. Companies that hire workers could help ease the financial burden.
The unemployment rate in the San Antonio area rose to 7.8% in November, and the employment growth rate of 1.4% is well below the 4% rate in Texas, according to the Federal Reserve Bank of Dallas.
"We expect very little employment activity in Texas over the next few months, but as the vaccination spreads and people feel better we will return to fairly healthy growth," said Keith Phillips, Dallas Fed Vice President and Senior Vice President Economist said recently. "But not enough to restore all lost jobs. We believe we will end the year (2021) below pre-COVID levels."
Unlike the avalanche of foreclosures during the 2008 recession, people now have more equity in their homes and could sell, Gaines said.
San Antonio has a "relatively high percentage" of homes that are funded by Federal Housing Administration and Veterans Affairs Department loans, which are "probably the most vulnerable properties," Gaines added.
Aid programs, eviction moratoriums, and rental specials help keep apartments full across San Antonio.
Across the region, the average monthly rent rose 0.4% to $ 984 from March to November, said Cindi Reed, regional vice president at ApartmentData.com. Average prices in luxury complexes have risen, but older properties with lower rents have fallen, and downtown San Antonio and the surrounding neighborhoods have seen the largest declines.
Average occupancy was close to 92% in the fourth quarter of 2019, but is expected to drop 1.5% this winter, according to a report from ApartmentTrends.com. Rents are expected to decrease by 1.2 percent.
"The market has remained stable through the pandemic and this is partly due to the rental support provided and the eviction moratorium," said founder and owner Robin Davis. "In the fourth quarter, however, the concessions rise, eviction notices are published and rents and occupancy fall."
According to Reed, around 5,000 units should be completed in 2021. A whopping 61 projects with nearly 18,000 units are proposed in the region, although it is unclear whether these plans will ultimately be implemented.
"I would imagine a lot of them will wait and see what happens to this pandemic and the vaccine release," Reed said. But San Antonio is "powerful" and is constantly absorbing units.
ApartmentTrends.com's Davis said nearly 6,900 new units were added this year and another 8,851 are under construction. A multitude of new projects linked to rising unemployment "have great potential for a further decline in the local housing market," she said.
Offices in 2021
In retrospect, San Antonio's stable office space was a blessing in 2020.
"We are usually not overbuilt, nor have we seen a pandemic that is now working in our favor," said Russell Noll, Executive Managing Director at Transwestern. "We don't have a lot of excess inventory in the market."
The vacancy rate was 9.2% in the third quarter, compared with 8.8% in the first quarter and the five-year average of 9%, according to the latest report from Transwestern.
The market posted a net negative absorption of 40,356 square feet, meaning more space was left than it was filled. But it has registered positive absorption of about 326,888 square feet in the last year, the company noted.
The pandemic and presidential election created uncertainty and prompted companies to take a break and take stock of their area of work, Noll said.
For example, some companies choose to extend leases by one year instead of three to seven years. Others are renovating their offices or trying to figure out how to do it.
When submitting requests for quotations and discussions with landlords, there was a new terminology for air purification, cleaning of public areas and other security protocols, according to Noll.
"It's a whole new language … that I've never seen before," he said. "Because it's a problem."
It's too early to say how many San Antonio employers will downsize, expand, or even forego offices altogether. Questions remain about how remote working affects the mental health, productivity and collaboration of employees.
"I think most companies are going to have an element of flexible work," said Noll, which means employees could come into the offices some days and work from home other days. "I think you will see a continuous re-evaluation of the interior design."
Whether office projects continue in the pipeline depends on the phase in which the individual projects are. For developments that have not yet been completed, "I think you will see them pause for a while," said Noll.