Boerne Spurs 15.4% Surge in Apartment Occupancy, Rents Up 8.2%

Key Takeaway

• Boerne, Texas, drives a 15.4% year-over-year surge in apartment occupancy along I-10 in the Hill Country.
• Rents in the northwest suburbs rose by 8.2% over three months, reflecting strong demand and limited supply.
• San Antonio's multifamily market struggles with high deliveries and lower occupancy rates at 86.5%, below the seller’s market threshold.

Boerne's Multifamily Boom

San Antonio's multifamily market may be struggling with declining demand and rents, but the northwest suburbs, particularly Boerne, are experiencing a surge in apartment occupancy. According to the San Antonio Business Journal, apartment occupancy in this emerging submarket along Interstate 10 in the Texas Hill Country soared by 15.4 percent year-over-year in May. This growth is driven by the town of Boerne, which has seen a significant influx of apartment dwellers. The limited supply of apartments in the area has led to high occupancy rates, with rents rising by 8.2 percent over the past three months, reflecting a more modest 2 percent increase when annualized.

High Occupancy and Rising Rents

The newness of the market in Boerne has contributed to its high occupancy rates, as pent-up demand meets limited supply. The Hill Country boasts one Class A apartment complex in its lease-up period with a 58 percent occupancy rate. Stabilized occupancy for Class A properties stands at 88.5 percent, while overall occupancy, supported by a strong Class B market, is at 91.5 percent. In contrast, San Antonio's apartment market is grappling with record-high deliveries, leading to a lower occupancy rate of 86.5 percent, below the 90 percent threshold that typically defines a seller's market. With 14,450 apartment units under construction in San Antonio and 4,467 units already delivered this year, the market is expected to match or exceed the 10,600 deliveries in 2023.

San Antonio's Struggles and Incentives

San Antonio's rental market has seen a 4 percent decline in annual rent growth, which has rebounded to 2 percent annualized growth over the past three months. To attract tenants, 60 percent of Class A apartment landlords are offering incentives like one month of free rent. This contrasts sharply with the booming market in Boerne, where demand continues to outstrip supply. The influx of new apartments in San Antonio, driven by low interest rates and a perceived high demand for housing, has led to a more competitive market with landlords offering concessions to fill vacancies.

Broader Implications for Texas Real Estate

The contrasting fortunes of Boerne and San Antonio highlight broader trends in Texas' real estate market. While some areas are experiencing a surge in demand and rising rents, others are grappling with oversupply and declining rent growth. This dynamic is not unique to San Antonio. In Austin, for example, the market is also facing challenges with oversupply and stagnant rent growth, as noted by Brad Stein, president of Intracorp Texas. Stein pointed out that while the population growth and job dynamism that fueled Austin's explosive growth have slowed, the city still faces a long-term undersupply of housing. This underscores the importance of strategic development and the need for pro-housing policies to address affordability and supply issues.

Street Views

• Bruce McClenny, ApartmentData (Bullish on Boerne's multifamily market):

  "Most of that growth is concentrated in Boerne. There’s hardly anything going on between Boerne and Kerrville, and there are some small apartments in Kerrville."

• Bruce McClenny, ApartmentData (Neutral on San Antonio's apartment market):

  "San Antonio’s apartment market is grappling with record-high deliveries, leading to a lower occupancy rate of 86.5 percent, below the 90 percent threshold that typically defines a seller’s market."