The San Antonio self storage industry continues to yield new developments despite a slight slowdown in construction compared to the flourishing building trend of the last three years. While the previous construction boom has brought street rates down, developers still invest in new developments, but at a more moderate rate. The current slow but steady development trend comes as a response to the existing inventory and also to the potential market unpredictability associated with the current pandemic.
National Construction Boom Sends Street Rates Plummeting
National rates have declined by 3.0% on a Y-o-Y basis, mainly due to the intensified construction activity that saw inventories swell in most markets around the country. About 97% of the top markets saw their street rates for standard non-climate-controlled units decrease in April 2020 as a result of the coronavirus’ disruption of the economy. As it turns out, the national average street rate reached $113 for a standard unit in April 2020, according to data provided by Yardi Matrix. Rates for climate-controlled (CC) units of the same size were also negatively affected – with an even sharper drop, down by 6.0%.
So far, Minneapolis and Nashville have seen the greatest Y-o-Y dips, with 10% drops in street rates for non-climate-controlled standard units. Radical shifts in self storage street rates also occurred in Charleston, a 9% drop, while Orlando, Tampa and Atlanta all saw a 7% drop. It is uncertain which way the rates will go, given the current pandemic climate.
Concerning Texas markets, Houston took the steepest dive in terms of year-over-year street rates – 6% as of April 2019, with an $81 average monthly street rate.
San Antonio Street Rates on a Steady Downward Slope
Compared to other popular metros which see much higher rates, San Antonio remains an attractive self storage haven. In line with the declining trend over the past three years, the metro area recorded a drop in self storage rates in 2020, from $96 in January to $94 in April for a standard 10×10 unit. This street rate evolution is in line with the downward trend registered in 2019 as rates dropped from $100 in January 2019 to $97 in December 2019, for a standard 10×10 unit.
Given the large variety of storage facilities on the market, San Antonio’s reasonable pricing is projected to be preserved, offering a balance in the supply and demand dynamics. The slight downward pricing slope of this relatively stable market favors not only local renters, but also new residents – in 2018 the area welcomed quite an influx of newcomers.
Robust Economy Supported by Population Increases
While the huge influx of new people should cause more demand and a spike in self storage street rates, the large number of existing facilities keeps prices on a downward slope.
As it turns out, Texas attracted the largest number of new transplants of any state in 2018, according to our latest report on migration trends. As many as 28,152 people changed their residence for the San Antonio metropolitan area in 2018, a 1.8% yearly increase compared to 2017 according to data provided by the US Census. In 2018, the San Antonio area ranked 24th nationally out of 383 for the metros that welcomed the most newcomers.
In terms of job availability, San Antonio has experienced significant growth. The healthcare sector saw the highest increase of jobs, with an additional 79% growth in May 2020. In addition, physical and social science occupations registered the second highest surge (24%), followed by the transportation and material moving sector with 22% more jobs during the same time period.
Lower Y-o-Y Street Rates Cause New Construction Rates to Dwindle
The Lone Star State in general has seen flow in its development pipelines even out during 2019, with Austin and Houston’s rates of self storage construction as a percentage of total inventory going as high as 8.0% and 3.0%, respectively.
In San Antonio, the intensified self storage development seen in previous years caused a drop in street rates, a trend that’s expected to continue in the near future. Although construction activity is slowing down, it still follows a stable growth pattern, increasing by 3.7% in April 2020. So far, the industry hasn’t fully felt the ripples of economic disruption caused by COVID-19.
In fact, construction has continued on an even keel with new additions following an upward slope in the last three years. Five new storage facilities were added to the self storage inventory in 2017. The next year saw that number double, as a natural consequence of increased market demands. In 2019, the construction trend tapered down, but it continued to be high with 8 new deliveries, covering a total of 639,965 square feet in rentable space.
Here are 5 of the largest facilities that were built in 2019:
1. CubeSmart Self Storage – 1426 North Pan Am Expwy, San Antonio, TX 78208 – 117,092 sq. ft.
Servicing both the Pearl District and the Broadway Corridor, the CubeSmart Self Storage facility is located at the junction of major local highways, with N PanAm Expy running parallel to the property.
Spread out over 1.03 acres, the property encompasses 123,255 square feet in total. The rentable area, however, covers 117,092 square feet.
2. LifeStorage – 10126 Potranco Road, San Antonio, TX 78251 – 101,022 sq. ft.
A Potranco neighborhood self storage addition, the LifeStorage facility is not far from Loop 1604 and about 15 minutes away from the University of Texas at San Antonio.
The property comprises 3.74 acres and includes a total of 134,696 square feet, with 101,022 square feet of rentable space.
3. Extra Space Storage – 12806 Vista Del Norte, San Antonio, TX 78216 – 93,072 of sq. ft.
Adjacent to the Vista del Norte neighborhood and a mere 5 miles away from San Antonio Airport, the Extra Space Storage facility is another 2019 development.
The new development occupies 2.4 acres and encompasses 124,096 square feet in total. The actual rentable space covers 93,072 square feet.
4. LifeStorage – 3533 Roosevelt Avenue, San Antonio, TX 78214 – 96,316 sq. ft.
The LifeStorage facility is a new development, built in 2019 and meant to service the area around Stinson Airport and the bordering Mission San Jose neighborhood as well. San Antonio International Airport is also in close proximity – only a 15-mile drive away.
The property covers 6.99 acres and encompasses 96,316 square feet in total. The rentable area, however, covers 91,500 square feet.
5.Extra Space Storage – 20523 Stone Oak Pkwy, San Antonio, TX 78258 –94,902 sq. ft.
The last facility to make our list is another Extra Space Storage facility that is situated in the near vicinity of Highway 281 and Loop 1604.
Spread out over 2.56 acres, the property encompasses 94,902 square feet in total. The rentable area, however, covers 71,176 square feet.
In the wake of the current pandemic and as a result of the high existing inventory, developers have diminished their building efforts – in 2020 only 5 new developments are currently under construction, a total of 388,115 square feet of rentable space.