However , approximately 3,000 new units entered the market in the Class B category . Not since 2020 have a similar number of units been introduced in the Class B subset and 2020 was also the last year in which Class B new supply outweighed Class A new supply . This dynamic was partially due to an increased geographic spread of new supply into areas with lower average rents .
The submarket with the newest supply last year was the Far West region with just over 1,600 new units . This submarket covers the area west of I-410 and north of US-90 and ended 2023 with an average effective rent that was 25 % lower than the market-level average . The second-leading submarket for new supply was New Braunfels , an area also below the market average in average effective rent .
Net Absorption and Average Occupancy
As was the case nationally , the Greater San Antonio market saw substantial improvement in apartment demand last year after the trough of 2022 , but with a key difference . Net absorption remained negative for a second consecutive year . 2022 and 2023 were the only two years of the last two decades to suffer a net loss of leased units . The decline in 2023 was by less than 200 net units , a far cry from the net loss of more than 4,200 leased units in 2022 .
Improvement in demand from the 2022 level was observed across the price classes . Class A managed to nearly double the 2022 total with nearly 1,300 net absorbed units . The top of the market avoided negative territory in both 2022 and in 2023 . Class B properties succeeded in returning to positive ground in 2023 , but only to the tune of about 400 net absorbed units . In the bottom two price tiers , last year was the second straight year of lost ground , but the losses were considerably smaller than in 2022 . Class C properties shed just more than 300 net leased units while Class D suffered a net loss of almost 1,000 leased units .
The overall occupancy performance reflects the impact of elevated new supply at a time of missing-in-action apartment demand . For properties that entered the year already stabilized , a 205-basis point decline in average occupancy brought the average to 90 %. For stabilized properties , last year ’ s average occupancy loss was smaller than that of 2022 but was otherwise also the worst slide in two decades – narrowly beating out 2008 . As for the year-end average occupancy , the 2023 level was better only than in 2008 and 2009 .
Takeaways
2023 was an interesting year for Greater San Antonio multifamily . Apartment demand showed robust improvement relative to 2022 and average occupancy declined by less than in 2022 despite about twice as many new units being delivered last year . On the other hand , for a second straight year , both net absorption and average occupancy change were negative . In addition , average effective rent growth also finally returned to Earth , and then some , with its first negative year since 2008 .
Looking ahead to 2024 , the new construction pipeline is set to be very active again . It is hard to envision a scenario where net absorption would recover enough to fully offset the new units , so the year is likely to be a third straight with an average occupancy decline . For rent growth to return to the positive , apartment demand will need to at least get back to its normal range after two years of hibernation .
* Jordan Brooks is a Senior Market Analyst at ALN Apartment Data .
Despite net absorption being underwater , the improvement from 2022 meant that even with the sharp rise in deliveries average occupancy performance fared better last year . A decline of 360 basis points was smaller than the 410-basis point slide in 2022 and brought Greater San Antonio overall average occupancy to 87 % to close 2023 . The two most recent annual decreases were the largest of the last twenty years for the area and the 87 % average to finish the year was the lowest year-end average occupancy of that period as well .
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