March 27, 2026

New construction in the San Antonio multifamily market expected to slow further in 2026

Q4 2025

San Antonio multifamily market overview

San Antonio’s multifamily market is entering the early stages of a supply correction following the aggressive development cycle that peaked in 2024. For much of the past three years, operators have weathered persistent downward pressure on rents and occupancy as a large volume of newly delivered units competed for tenants. While operating fundamentals remain softer than long-term norms, conditions appear to be stabilizing as construction activity slows and demand continues to absorb recently completed projects. Demand remained resilient in 2025, with approximately 5,400 units absorbed during the year, helping to contain vacancy increases. The market’s underlying renter demand should remain durable, supported by the metro’s steady employment expansion, population growth, and relative affordability. As a result, San Antonio is gradually transitioning from a period defined by rapid supply growth toward one characterized by rebalancing.

Investment activity in 2025 closely tracked levels from the past two years, although cap rates compressed by 50 basis points from the prior year. The market’s current conditions have also opened opportunities for value-oriented acquisitions. Annual sales data reflects an increasing proportion of lower-tier properties in the sales mix. In 2025, Class C properties accounted for approximately 45% of the total transactions, a larger share of the average mix than in recent years. Class A properties accounted for less than 20% of total sales in 2025, down from a longer-term average of closer to 30%. Investors are increasingly targeting older vintage properties where pricing adjustments and operational repositioning may offer upside once rent growth returns. This type of investment activity was seen especially in the North and Northwest submarkets, which together accounted for nearly half of all San Antonio sales.

Looking ahead

The next phase of San Antonio’s multifamily cycle will likely be defined by improving balance between supply and demand rather than rapid growth. The 2026 development pipeline is thinning, with apartment completions forecast to drop by 21% annually. With fewer projects competing for renters in the coming years, recently delivered inventory is expected to achieve occupancy gains within tighter timeframes. The year ahead is expected to mark the first annual vacancy decline since 2021, providing a measure of relief to operators who have been impacted by the competitive pressures of new inventory. With vacancy expected to tighten by 90 basis points, there may be an opportunity to implement modest rent increases, particularly in areas such as the Far Northwest and Kerrville submarkets, which have been among the market's top performing submarkets in recent years.

For investors, the current environment may represent a transitional window while fundamentals begin to stabilize. As rent performance regains traction, investor sentiment is expected to broaden. In the near-term, investment activity is likely to remain focused on value-add acquisitions and workforce housing that benefits from San Antonio’s relative affordability. As the market moves beyond its peak supply cycle, limited new development should position San Antonio for rent growth and steadier investment performance heading into 2026. Over the long-term, as supply levels shift back toward equilibrium, San Antonio should draw increasing interest from core and core-plus capital seeking long-term exposure to one of Texas’s more affordable markets. Apartment units delivered at the 2024 supply peak should be approaching stabilization and ready to be marketed for sale, which could lead to an increase in Class A sales in 2026.