Downtown living in demand, but lacks higher occupancies, amenities, affordability

Chad and Mariela Delgado Miller, who live at Encore SoFlo on South Flores Street, became downtowners together. Five years ago they had their first date at SoHo Wine & Martini Bar on West Crockett Street. They’d meet downtown because it was centrally located, he driving from Pleasanton, she from Alamo Ranch.

Date after date, downtown was their playground and in 2016 they got a place together at the Milmo Lofts on South Flores Street. He proposed to her on top of the Market Street parking garage, where they would end their nights, talking, before parting ways early in the courtship. They eventually got married at the Spanish Governor’s Palace, and would bounce around to other communities, including the Alteza Residences atop the Grand Hyatt and the Steel House Lofts just south of downtown.

You could say Chad and Mariela bought into the downtown lifestyle from day one.

“My husband and I live, work and play downtown,” said Mariela, 38. “We walk everywhere; we hardly ever leave. When I have to go out to The Rim, oh my God, I feel like it takes me forever. Sometimes we have to go meet friends out there and it’s such a drag.”

The Millers are not alone.

There is roughly 91% occupancy for the 17 apartment buildings built in the last decade and that are more than a year old—4,061 units—based on a survey the Heron conducted in January. We define the downtown area as having a radius of more or less 1½ miles from the 200 block of East Houston Street, downtown’s center.

The 91% figure doesn’t include older dwellings such as the Vistana or the Robert E. Lee apartments. What it does provide is a snapshot for the demand at the newer developments that were built with the help of public subsidies, most of which come in the form of tax breaks. Include the three newest developments that opened last year—Encore SoFlo (June), The ’68 (July) and the Pearl’s Southline Residences (October); for a total of 712 units—and the occupancy drops to 82%.

Housing experts say 91% signals a stable market, but that levels need to be around 95% occupancy for the downtown market to be considered booming.

Property managers also expect to see their occupancies and leases tick upward as the apartment market leaves the slow season and enters the hotter time of the year, literally and figuratively.

The group that’s likely taking a hard look at downtown’s occupancy numbers are developers. In recent years, there’s been a drop in new incentive agreements signed with the city, in which developers receive tax rebates on the city portion of their property tax bill, development fee waivers and forgivable loans. The lull happened after Mayor Ron Nirenberg’s moratorium of 2018, the year incentive packages were put on ice while city officials, at the mayor’s behest, tweaked the program so that it offers less subsidy to developers while attempting to generate more affordable housing.

Some observers believe developers aren’t pulling the trigger on new deals because they want to wait and see how well developments in the pipeline do, nearly 2,000 units either under construction or in development, in terms of occupancy.

Downtown appears to be in the middle of the old chicken-and-egg analogy, where the few thousand apartments and condos that have been built in recent years has yielded some neighborhood-type amenities. They’ve also attracted employers to the area such as USAA, and Credit Human, Bank of America and Jefferson Bank near the Pearl. Downtown is home to a plethora of bars and restaurants, and some event venues and spaces such as the Majestic Theatre, Travis Park and the Pearl. Parts of downtown still lack basic neighborhood amenities.

Downtown is also an expensive place to live; with some exceptions, it lacks affordable housing. Good luck finding a studio apartment for less than $1,000. One bedroom rents tend to start around $1,300. Would occupancy levels be higher if rents were closer to San Antonio’s median income?

Empirically speaking, possibly more people live downtown today since the days before Hemisfair ’68, and before Urban Renewal destroyed the old West Side. But the city, since it prioritized the construction of downtown housing under Mayor Julián Castro as a means to its revitalization, is reaching for the largest central population in San Antonio’s history.

Read the first part of this series:
Downtown housing market is steady, but far from the boom of recent years

The numbers

In January, we called every new apartment building that was built in the last decade, and asked for their occupancy figures. Here’s what we found:

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A few notes:

The Cellars at the Pearl, among the city’s most expensive apartments, boasted the highest occupancy at 95.9%. Other market-rate developments in the Pearl and Museum Reach area were nearly a percentage point behind: The Mosaic, Jones & Rio, River House.

The newer developments understandably have lower occupancy levels. David Adelman, the developer who built The ’68, attributes its lower number to the fact that the building is somewhat hidden, tucked deep inside Hemisfair. At Southline and Encore SoFlo, the managers attribute the lower figures to the slower part of the leasing season.

At Encore SoFlo, where the Millers live, they’re starting to see a sharp rise in occupancy, which jumped from 30% in January to 37% this month. Mercy Klebahn, the community manager at Encore SoFlo, says her office is fielding calls from prospective residents who are looking to move in in the spring and summer.

“With the traffic we’re getting right now, we’re looking out to the March-April timeframe,” Klebahn said. “We’re even looking to June and July. Right after Spring Break, we usually see that increase.”

At Encore SoFlo and The ’68, the managers say they have a healthy mix of residents.

“We’re getting retirees, couples, professionals,” Klebahn said. “Being that we’re downtown, we get a lot of the downtown professionals, attorneys, doctors, nurses. We’re also seeing a lot of people coming from out of state.”

Star Workcuff, the business manager at The ’68, said the community has a mix of city employees, military members, nurses, doctors, and some students. It’s one of the few newer apartments downtown with affordable housing. Half of its 151 units are reserved for people making 80% of the area median income (AMI), which is $56,800 for a family of four, according to the U.S. Department of Urban Development. It’s a requirement because the development was built in partnership with the HemisFair Park Public Facilities Corporation (PFC), a nonprofit that affords Adelman a full property tax exemption under state law. Hemisfair has its own affordability requirements for housing built at the park: 10% of the units must be rented to people making between 50% and 70% AMI. In addition, rents cannot exceed 25% of the tenants’ income.

Charles Tiseth, general manager at Playland pizzeria on East Houston Street, lives in one of the subsidized apartments. He lived in New York City for four years for college, and says downtown San Antonio is affordable compared to other cities. Compared to San Antonians, the story’s different.

“Downtown units are still a little bit out of my budget,” Tiseth said. “I make a total living salary, but I have student loan debt and at the end of the day it’s not enough to afford market rate.”

Not there yet

Two years ago, Joey and Stacy Cantú-Pawlik, both 28, moved into 1221 Broadway, where they live with their two dogs, Stella and Otto. He works as the transportation planner at the Alamo Area Metropolitan Planning Organization in Southtown, and rarely takes his car to work, opting for the bus, a scooter or his bike. She works in the Medical Center and therefore has a more difficult commute.

Pawlik says his part of downtown, the north Broadway area, for all of its newly-built apartment buildings and high occupancy, still lacks some basic amenities like a grocery store.

“It would be nice to go walk and buy something some times,” Pawlik said. “A little bodega or market on the corner would be fantastic.”

He’s ready for more nuanced retail offerings that cater to residents.

“Hopefully, something more than restaurants and bars would be great,” he said.

Brenda Lee Gonzales, 40, would love to live downtown, where she works at the Atkins Group, an advertising agency on Soledad Street, but the rents are outside of her price range. For work, and for her Instagram page, where she posts regularly about the food scene, Gonzales says she spends 85% of her time downtown.

“I want to classify myself as middle class with a degree,” said Gonzales, who is a graduate of the University of the Incarnate Word. “I do feel like I make enough money to support myself, and I live within my means … I feel like I have to take on another job in order to live in the location I want to in the city I grew up in.”

The downtown area’s average rent at the end of 2019 was $1.74 per square foot, far above the city’s average of $1.20 per square foot, according to Austin Investor Interests, an Austin-based company that researches housing there and in San Antonio.

Gonzales says what’s often left out of the equation are fees apartment buildings tack on, such as for security, trash pick up and parking.

Last month, during a City Council meeting in which the city’s incentive policy for downtown housing was hotly debated, Councilwoman Ana Sandoval said the cost of building parking shouldn’t be handed onto a tenant—either with rent or sales price—who doesn’t own a car.

In the city’s current incentive policy, which the City Council ratified in December 2018, developers are given less of an incentive—75% property tax rebate over 15 years; 25% feeds an affordable housing fund—and are required to offer units to households under the area median income if they are built on downtown’s outskirts and beyond.

Both sides now

In 2017, when Mariela and Chad lived at the Alteza, which they rented for $2,100 from a condo owner, she would joke about their low-income status at the posh community that sits on top of the Grand Hyatt hotel. They were lower-income relative to the condo-owners who also lived there—the executives, judges and doctors.

Mariela, who works in the communications department at H-E-B’s headquarters, had come a long way.

Her family immigrated from Mexico when she was four, and lived in public housing—at the Villa Verimendi apartments on the West Side—for a short time. She picked up English quickly, learning from the neighbors she’d play with. When her father landed a job with the city, the family moved to the South Side where she eventually attended Burbank High School. She describes a loving home growing up, one in which her parents were invested in her education. She entered Upward Bound, a federal program that allowed her to earn college credit while still at Burbank.

Mariela says she’s supports Nirenberg’s plan to bring rents down to lower-income households. She also agrees with his assertion that San Antonio needs to help lift up lower-income residences to the market-rate rents.

“I’m grateful Chad and I can afford to live in the place we’re living in now,” she said. “I know that I worked very hard for it. I see those who have had the same opportunities like me not taking advantage of them. In my freshman year, I started with 500 people in my class. Senior year, in the class of ’99, there was 150—a lot of that was pregnancy, a lot of that was dropouts.”

“I agree with our mayor. I think we should give those opportunities to people … I also see the other side. You have to work hard for what you want. At the same time, you have to have those opportunities.”

Contact Ben Olivo at 210-421-3932 | ben@saheron.com | @rbolivo on Twitter

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The area median income (AMI) levels shown here are for the greater San Antonio area (Bandera, Bexar, Comal, Guadalupe and Wilson counties), according to the U.S. Department of Housing and Urban Development.