San Antonio slipped to 21st in a new annual ranking of U.S. real estate markets with the best overall prospects for the year ahead and landed at eighth-best in the nation for homebuilding prospects in 2022.
The rankings are part of the Emerging Trends in Real Estate report issued by the Urban Land Institute and PricewaterhouseCoopers. A year ago, it put San Antonio at 12th overall and sixth for homebuilding.
The firms surveyed real estate executives about homebuilding prospects, investor demand, development opportunities and recommendations for buying, holding or selling different property types to come up with the rankings.
The report also includes information about population, business costs, housing metrics and employment.
Heading into next year, San Antonio ranked behind No. 4 Austin and No. 7 Dallas/Fort Worth, but ahead of Houston, which landed at 24th overall. In the top three spots were Nashville at No. 1, Raleigh/Durham at No. 2 and Phoenix at No. 3.
Phoenix, Seattle, Denver, San Diego and Miami were among the cities that overtook San Antonio between the firms’ 2021 and 2022 reports.
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San Antonio is among a group of Sun Belt “magnet” cities attracting new residents and companies and generally growing faster than the U.S. average when it comes to population and jobs.
“Their demographics are skewed toward faster economic growth prospects with higher proportions of millennials and gen-Xers and relatively fewer seniors and retirees,” the report states. “These metro areas are also the preferred markets for investors and builders.”
San Antonio and other “Super Sun Belt” cities are “large and diverse but still affordable,” drawing a range of businesses and rebounding more quickly from the economic ravages of the coronavirus pandemic, the report adds.
On buy/hold/sell rankings of various types of real estate, San Antonio ranked No. 1 for hotel property with 54 percent of those surveyed recommending it as a buy, 38 percent as a hold and 8 percent as a sell. It ranked third for retail property, with 43 percent recommending buy, 50 percent hold and 7 percent sell. It was eighth on the scale for multifamily property and 12th for industrial property.
The national economy and real estate markets have recovered from the coronavirus pandemic faster than executives said they initially expected.
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But the pandemic prompted changes in how people work, shop and live, with companies moving to remote or hybrid models for office workers and more shoppers ordering groceries online. That’s affecting demand for office and retail space.
“Firms will need to provide enough space for remote workers to collaborate in person, at least occasionally,” the report states. “But under almost any conceivable scenario, firms will be leasing less space in the future than before.”
As home prices and rents rise and residents of pricey cities relocate to smaller markets, housing affordability is another pressing concern.
Increasing costs are putting home ownership further out of reach for many prospective buyers, and construction of new properties isn’t keeping pace with household formation.
“Housing affordability worsened during the pandemic as the rise in both home prices and rents barely paused during the brief recession and then quickly accelerated as the economy reopened,” the report’s authors wrote. “Prices and rents are still climbing at some of the highest rates ever tracked, well ahead of relatively modest wage gains.”