Empty stores filling up as retail construction stalls

San Antonio’s retail market is inching toward prepandemic occupancy levels as new tenants fill some of the vacancies left by shuttered stores.

But construction of new space in the area continues to slow, in part because of surging construction costs amid supply chain and hiring difficulties.

The occupancy rate at the area’s largest shopping centers was 94 percent at the end of last year, according to a new report from Dallas-based brokerage firm Weitzman.

That’s up from 93.6 percent at the end of 2020 but less than pre-pandemic levels of 94.5 percent at the end of 2019.

“The market’s higher occupancy reflects steady demand for existing small-shop retail space from concepts ranging from restaurants to medical, beauty and boutique fitness,” the report says. “The past year also reported leasing that absorbed some of the market’s larger vacancies.”

Occupancy in San Antonio at year-end was lower than Austin’s 96 percent and Houston’s 95 percent but higher than in Dallas-Fort Worth, where the rate was 93.5 percent.

The San Antonio figures are based on Weitzman’s review of about 47.9 million square feet of space at shopping centers of 25,000 square feet or more.

S.A. market moves

In the San Antonio metro area, Santikos Entertainment took over Alamo Drafthouse’s

New Braunfels theater and opened a new location there last year. It is also renovating the closed Westlakes theater on the far West Side of San Antonio.

Salons by JC is leasing about 14,178 square feet of space previously occupied by Bed Bath & Beyond at Alamo Quarry Market, as well as 13,720 square feet at a shopping center at the intersection of U.S. 281 and Loop 1604, Weitzman reported.

Shoppers World opened at South Park Mall last year in a roughly 33,000-square-foot space that was vacated by Bealls, and gym chain TruFit opened a location in a closed Gold’s Gym nearby.

Round1 Bowling & Amusement plans to open a facility with bowling, arcade games, party rooms and dining in roughly 53,000 square feet at North Star Mall. Construction is expected to begin this summer and wrap up in June 2023, according to a filing with the Texas Department of Licensing and Regulation.

PGA Tour Superstore opened a 34,500-square-foot location and Goodwill San Antonio added a 25,000-square-foot store near the intersection of Blanco

Road and Loop 1604.

Peter Piper Pizza, Pluckers Wing Bar, Velvet Taco, La Esperanza, BB’s Tex-Orleans, Lupe Tortilla and North Italia are among the restaurants and bakeries that have opened or are planning new locations.

Rates hold steady

Rents for retail space have stayed stable, but perks such as a period of free rent and finishout allowances are not as common as they were in 2020, according to Weitzman.

Average asking rates at the market’s newest and strongest shopping centers ranged from $26 to $38 per square foot per year for small spaces and up to the $40s for end-cap locations.

Rents for Class B properties generally cost from $18 to $26

per square foot and for Class C properties from $10 to $16 per square foot.

Less retail space is going up across the area in part because of rising materials and labor costs, according to Weitzman. That’s helped keep existing shopping centers occupied during the pandemic.

“To justify higher construction costs, rents required to economically justify a project can outpace the overall market, reaching the mid- to upper-30s per square foot per year even for large-format spaces,” the firm stated.

About 354,000 square feet of space was added through new and expanded projects last year, down slightly from 355,000 square feet in 2020. Construction has fallen each

year since 2018.

New stores are opening at the Shops at Culebra, the Shops at South Rim and Boerne Stage Crossing, Weitzman reported.

The firm also noted several projects by H-E-B: It’s building a new store in Cibolo, replacing an existing store in New Braunfels and expanding locations at Loop 1604 and Bandera Road, and in Lincoln Heights.

Heading into 2022, Weitzman expects occupancy and new construction to rise.

“The retail market is further supported by San Antonio’s healthy economy, which reports strong housing starts and population growth,” the firm added.

Josie Norris / Staff photographer Shoppers World now occupies the space at South Park Mall vacated by Bealls.