1.0 Regional Economic Context: The Engine of Retail Demand

San Antonio’s dynamic economy stands as the powerful and resilient engine driving its retail real estate market. As a premier Sunbelt growth market, the region’s consistent and robust expansion in both population and employment underpins vigorous consumer demand, fuels developer activity, and solidifies investor confidence. This strong economic foundation creates a fertile environment for sustained retail performance and strategic expansion.

1.1 Job Market & Wage Growth Analysis

The San Antonio metro’s labor market demonstrated remarkable resilience and growth in 2025, providing a stable foundation for consumer spending. Despite minor fluctuations, key indicators point to a healthy and expanding workforce with increasing purchasing power.

1.2 Population Dynamics & Consumer Base Expansion

Demographic momentum is a primary catalyst for San Antonio’s retail sector. The metro area continues to attract new residents at a pace that ranks among the highest in the nation, directly expanding the consumer base and creating sustained demand for goods and services. Between 2023 and 2024, San Antonio added nearly 24,000 residents, ranking as the fourth fastest-growing city in the United States. This trend is set to continue, with the San Antonio metro’s population forecasted to grow at a rate of 1.1% over the next five years—more than triple the forecasted U.S. average of 0.3%.

1.3 Strategic Economic Drivers

Targeted, large-scale economic development is creating concentrated hubs of high-income consumers. A prime example is Port San Antonio, whose Tech Port campus now generates $9 billion in annual economic activity. Jobs located on the campus pay an average annual salary of $111,000, creating significant ripple effects across the regional economy. In recognition of the need to serve this high-earning workforce, Port San Antonio is planning to break ground on new projects that will include dedicated retail amenities.

These powerful economic fundamentals translate directly into exceptional performance and sustained investor interest within the region’s retail real estate sector.

2.0 Core Retail Real Estate Performance

The fundamental market story of 2025 is the collision of persistent tenant demand with a critical shortage of available space. This supply-demand imbalance has created strongly landlord-favorable conditions across the metro area, shaping key performance indicators that underscore the market’s health and provide the foundational evidence for the strategic investment theses outlined in this report.

2.1 Leasing, Vacancy & Absorption

Market fundamentals remained exceptionally tight through the third quarter of 2025. Despite a slight uptick in vacancy, the overall rate remains near historic lows, keeping pressure on tenants seeking to enter or expand in the market.

_{Table 2.1: Q3 2025 Market Fundamentals}

The strategic implications of these metrics are clear. San Antonio’s vacancy rate has remained below the 5.0% threshold since mid-2021, creating a supply-constrained environment that gives landlords significant negotiating leverage. While leasing activity has slowed from the record pace of previous years, net absorption remains positive, indicating that move-ins continue to outpace move-outs. This resilience is underscored by the market’s ability to quickly backfill large spaces vacated by national brands; for example, former Bed, Bath & Beyond locations were swiftly leased by retailers such as Homesense and Home Goods, demonstrating strong underlying demand for quality big-box spaces. For tenants, this dynamic signals that waiting for market softness is not a viable strategy; securing quality space will remain a competitive endeavor. For landlords, it confirms their continued pricing power and the low-risk nature of their portfolios.

2.2 Rental Rate Analysis

As of the third quarter of 2025, the average triple-net (NNN) rental rate for retail space in San Antonio stood at $19.16 per square foot.

This figure represents a modest 1.6% decrease year-over-year. However, this slight dip should be viewed in context; current rates remain well above the market’s historic average. The decrease is a compositional effect of recent large-format leases, which typically transact at lower per-square-foot rates than small-shop spaces. Certain high-growth geographic corridors have significantly outperformed the market average. Properties along the I-10 corridor in Northwest San Antonio, for instance, have seen stronger rent growth. This is particularly true for small-footprint tenants in desirable, high-traffic locations, such as Scooped Cookie Dough Bar, which signed a lease for a 1,300-square-foot space near I-10 and Loop 1604 at an above-average rate of $28 per square foot NNN. This performance at the high end of the rental market, alongside the resilience of necessity-based retail, offers an early signal of the market bifurcation that defined 2025, with strength concentrated at the premium and value ends of the spectrum.

2.3 Sales & Investment Trends

Investor confidence in San Antonio’s retail market remained firm throughout 2025. Over the 12 months ending in Q3 2025, a total of 705 retail properties were sold, representing a cumulative sales volume of approximately $1.175 billion.

Key investment metrics for this period reflect a stable and attractive market for capital:

Deal flow has been primarily driven by smaller private buyers and investors utilizing 1031 exchanges, particularly for assets in the $2 million to $4 million range. The average cap rate has remained remarkably stable, signaling that investors have adjusted to the current interest rate environment and have strong confidence in the market’s long-term fundamentals and potential for future income growth.

This combination of strong operational performance and tight supply conditions has fueled a significant increase in development activity, which is now reshaping the region’s retail landscape.

3.0 Development & Construction Pipeline

The development pipeline is the San Antonio market’s direct response to the intense demand and severe supply constraints that have characterized the last several years. As of Q3 2025, approximately 1.4 million square feet of new retail space is under construction across the metro area. This figure represents a significant 53.3% increase over the previous year, highlighting the conviction of developers in the long-term health of the region and the urgent need for new, high-quality inventory.

3.1 Geographic Concentration of New Supply

New retail construction is highly concentrated in San Antonio’s northern path of growth, following the explosion of residential development in the city’s affluent northern suburbs and along its primary transportation arteries. The corridors along U.S. Route 281, Interstate 10, and Interstate 35 are the epicenters of this activity. The top three submarkets for new construction are:

3.2 The Shift to Mixed-Use Destinations: A Case Study of The Merc

A defining trend in new development is the strategic shift away from traditional, single-use retail centers toward vibrant, experiential, mixed-use destinations. This evolution provides the blueprint for our second key investment thesis—’Embrace Experiential & Mixed-Use Formats.’ The most prominent example is The Merc, a major new project that recently broke ground in Northwest San Antonio. As project developer Rob Schumacher stated, “With The Merc, we’re not building another strip mall with some apartments nearby. We’re creating a legacy destination.”

3.3 Major Projects Underway

The development pipeline includes a diverse mix of community centers, power centers, and mixed-use projects designed to serve the region’s rapidly expanding neighborhoods.

_{Table 3.3: Selected Major Retail Projects Under Construction or Planned for 2026}

This wave of new construction is heavily concentrated in the specific submarkets and corridors experiencing the most intense population growth.

4.0 Key Submarket & Corridor Analysis

While the metro-wide data confirms a healthy market, strategic capital is best deployed in specific high-velocity corridors. This analysis validates our first key investment thesis—’Prioritize “Rooftops-Driven” Development’—by dissecting the unique dynamics of the submarkets where residential growth is creating undeniable and underserved retail demand.

4.1 The Northwest / Far West High-Growth Corridor

This expansive area has become a critical growth corridor for the entire region, defined by immense master-planned residential construction that is generating massive, built-in demand for retail services. Developers are racing to deliver community-focused centers to capture this new consumer spending.

4.2 Comal County (New Braunfels): The Affluent Tourism Nexus

New Braunfels has solidified its status as a hyper-competitive submarket, fueled by a powerful combination of rapid population growth, an increasingly affluent demographic, and a robust tourism sector. Its retail market fundamentals are exceptionally strong, with absorption consistently keeping pace with or even outpacing the delivery of new supply. This indicates a market where demand continues to outstrip available inventory, creating a low-risk environment for new development. The area’s expanding premium demographic is attracting high-quality national retailers, evidenced by the new Sprouts Farmers Market currently under construction at Creekside Crossing.

4.3 Guadalupe County (Seguin): The Emerging Regional Hub

Strategically positioned on the I-10 corridor, Seguin is rapidly transitioning from a smaller community into a self-sustaining regional retail hub. This transformation is best exemplified by the Seguin Crossing project, a major new power center that validates the city’s growing importance.

The $25 million project will deliver over 135,000 square feet of new retail space. It has successfully secured a powerful lineup of national anchor tenants, including Hobby Lobby, Five Below, James Avery, and a national sporting goods retailer, which will draw consumers from a wide surrounding trade area.

The success within these geographic markets is largely determined by the types of tenants and retail sectors that are thriving in the current economic environment.

5.0 Tenant & Retail Sector Dynamics

San Antonio’s retail tenant landscape in 2025 was clearly segmented. The market was characterized by a distinct bifurcation, with robust performance at the value-oriented and premium/experiential ends of the spectrum. An analysis of these dynamics confirms our third key investment thesis: to capitalize on this split by focusing on the outperforming sectors at both ends of the market.

5.1 Strength in Lifestyle, Luxury, and Home Goods

Investment in high-quality, destination retail centers continued unabated, attracting a host of premium tenants catering to the region’s growing affluent consumer base. This sustained investment in the premium end of the market is a direct reflection of the region’s powerful wage inflation—the highest in Texas—and the targeted creation of high-income jobs at economic hubs like Port San Antonio, which have expanded the affluent consumer base.

5.2 Resilience of Necessity and Value Retail

The necessity and value-oriented retail sectors proved exceptionally resilient. Despite some high-profile national brand closures, the impact on San Antonio’s high overall occupancy rate was negligible, as demand for well-located big-box space remains intense. This strength was demonstrated by major move-ins from large-format retailers such as Dick’s Sporting Goods (187,000 sq. ft.) and Home Depot (105,000 sq. ft.), which absorbed significant blocks of space and confirmed the durable demand for this category.

5.3 Food & Beverage (F&B) Sector Turbulence

In contrast to the growth seen in other retail categories, some segments of the food and beverage sector experienced significant challenges. A period of consolidation occurred in 2025, leading to several high-profile closures of notable restaurants and venues like Carriqui, Cascabel Mexican Patio, and The Amp Room. This consolidation in established urban areas stands in sharp contrast to the explosion of new dining concepts in the suburban growth corridors. It highlights a critical market shift: while operational pressures are challenging legacy F&B concepts, immense opportunity exists for well-capitalized brands that can follow the rooftops to the underserved master-planned communities in the Northwest and Far West submarkets.

6.0 Strategic Outlook & Forecast for 2026

The cumulative evidence from 2025 paints an unequivocal picture: the San Antonio retail market has fundamentally shifted from a demand-constrained to a supply-starved environment. While the forthcoming 1.4 million square feet of new supply introduces a new variable, our analysis indicates this inventory is not a headwind but a necessary response to pent-up demand. For astute investors and developers, this creates clear and actionable opportunities, provided they align their strategies with the three core market realities: rooftops-driven demand, the non-negotiable need for experiential formats, and the bifurcation of consumer spending.

6.1 Market Trajectory & Headwinds

The delivery of the 1.4 million square feet of retail space currently under construction will be the defining event of 2026. This influx of new inventory will test the market’s absorption capacity and may cause the overall vacancy rate to edge up slightly from its current historic low of 4.3%. However, this risk is manageable and largely necessary to meet pent-up demand. The continued strength of San Antonio’s population and job growth is expected to provide a sufficient base of consumer demand to absorb this new supply, provided that new developments are strategically located in the proven, high-growth residential corridors where demand is most acute.

6.2 Key Investment Theses for 2026

Based on a comprehensive analysis of the market’s performance and underlying drivers, several compelling strategic opportunities emerge for developers and investors in 2026.

6.3 Final Recommendation

The fundamental drivers of the San Antonio retail market remain exceptionally strong. The primary challenge for the market has definitively shifted from a lack of demand to a critical lack of supply. Consequently, the most successful strategies in 2026 will be those that focus on execution—delivering high-quality, well-located, and experience-driven retail environments. By doing so, developers and investors can effectively meet the needs of one of the nation’s most dynamic and rapidly expanding metropolitan areas, capturing durable returns and long-term value.

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Your rent roll, expenses, loan terms, and cash flow trends tell the real story.

When you know your numbers:

When you don’t, the property starts telling you what to do instead.

Vacancy quietly erodes value.

Every month a space sits empty, your NOI falls — and your negotiating leverage goes with it.

Smart owners have systems, not hope:

Fill the box → stabilize the value.

Your tenant mix is your brand.

Prioritize tenants who:

Quality tenants reduce turnover, strengthen renewals, and support higher rents.

Deferred maintenance isn’t neutral — it compounds.

Roofs, HVAC, parking lots, lighting… these directly influence:

Proactive upkeep protects NOI and protects your exit.

Strip center performance is hyperlocal.

Three-mile radius > national headline.

Know your:

This is how smart owners price, renew, and reposition.

Whether you plan to hold 5 years or 25, everything moves toward an exit.

Owners who think ahead:

Planning early gives you optionality later.

Your strip center isn’t passive.

It’s a business with moving parts — people, capital, leases, and decisions.

Operate with:

Owners who run their centers like businesses… get business-level results.

Your rent growth doesn’t matter if your NOI isn’t growing.

Focus on the bottom line, not the asking rent.

Note: San Antonio rent growth over the past 5 years rose about 16-17% on average. San Antonio property taxes and insurance has substantially grown more than rent growth, in some cases by 30-40%.

We recently sold a retail center at 10203 Culebra Road in San Antonio.

On paper, the property had some challenges:

But we reframed the narrative around value-add opportunity and aligned it with real market data showing:

We priced it strategically, told the story accurately, and created competitive tension.

The result:

Takeaway: When you frame the story correctly and leverage local market fundamentals, you create outcomes—not wait for them.

Q: “What’s the #1 metric I should track every quarter?”

A: Your trailing 12-month NOI.

Everything ties back to it — valuation, refi potential, buyer demand, cap rate leverage.

If you want a clearer understanding of where your strip center stands today — or what opportunities you might be missing — feel free to reach out.

I’d be more than happy to walk through it with you.

Thanks for reading. You’re always welcome to reach out with any questions or anything you need to better understand your investment. I’m here to help you make well-informed decisions with confidence.

— Ray Kang CCIM

Strip Center Investment Sales & Advisory