Building in a Price Sensitive Market

While San Antonio is one of the hottest markets in the country for new homebuilding, there is an absence of master-planned communities.

The product type, which is a type of mixed-use development that is essentially a microcosm of a city often to the point of providing its own utilities, is enormously popular in other Texas markets marked by sprawl, like Austin, Dallas and Houston as well as smaller cities like New Braunfels and Boerne.

In San Antonio, where affordability is a cornerstone of the housing market, it’s more complicated.

“You’re dealing with a higher land basis due to those amenities — and everything funnels back down to lot price,” said Bryan Glasshagel, a housing market analyst with data firm Zonda. “San Antonio is a more price sensitive market.”

Master-planned communities in San Antonio’s market would also be hard-pressed to compete with other Texas markets when it comes to home starts because of size, Glasshagel said. He pointed to nearby Santa Rita Ranch in Liberty Hill, which moves around 700 units yearly — figures that are, for now, likely out of reach for the Alamo City.

Still, master-planned communities can be a draw for many reasons.

True master-planned communities are typically defined by diverse product segmentation and community amenities said Thad Rutherford, president and CEO of SouthStar, the developer behind San Antonio’s Vida community on the South Side.

“The way it works at its fundamental best is you have affordable, attainable rental and for-sale all in the same community,” Rutherford said. “Each builder is building on 3-4 different lot sizes giving you 60-80 different types of choices — without a master-planned community you don’t have that type of variety.”

Rutherford said building master-planned communities also allow a developer to retain a cohesive artistic vision for a development. SouthStar is working closely with the city of San Antonio, and Texas A&M Univeristy-San Antonio to make improvements to major South Side roadways and add missing commercial assets like diverse options for retail.

He also noted that financing tools at the state level, such as municipal utility districts, and other types of improvement and utility districts, allow developers to recoup some of the money they spend putting in infrastructure on large plots of land outside city limits typically used by master-planned communities.

Community amenities are also a unique selling point. At its master-planned Mayfair development in New Braunfels, which began delivering the first of its planned 6,000 residential units last year, Rutherford said the developer is adding an off-street bike lane.

“Kids can go the entire loop from home, to school, to the coffee shop, to the park and back home without ever getting on the street,” he said.

A new Comal County Independent School District school is also coming to Mayfair, as well as green space and retail developments.

Product segmentation also makes it more likely that first-time buyers in the community who enjoy that experience can continue to live there said Mike Siefert, president of the Lookout Group. The developer is building Esperanza in Kendall County, a highly amenitized 3,400-unit development that also includes a school, and recently broke ground on George’s Ranch, an 800-unit acre lot community in the same area.

“When we bought Esperanza out of foreclosure in 2013, one of the things that interested us was the void of a true master-planned communities in the San Antonio area, which I think we’ve delivered in Esperanza,” Siefert said. He stressed the point that master-planned communities should have something for everybody.

“As your family grows you can move up, and if you want to downsize, you can,” he said.

But developers have to have the financial fortitude to weather an extremely longitudinal development timeline, however, which can be prohibitive.

“You’ve got to have a company that is strategically aligned with a 20-25 year vision and has the financial wherewithal to ride that out,” Siefert said. “We bought Esperanza in 2013, and are just now getting to a point in 2024 where the project starts to return capital to investors. That’s a heavy lift builders or smaller, less well capitalized developers aren’t able to make.”

While Siefert said the Hill Country charm is what attracted the Leander-based developer to Boerne, the San Antonio satellite boasts more flexible spending dollars than the Alamo City proper, where soaring housing costs can easily translate into no dice on a sale.

“It’s changed significantly in the past couple of years. We had visions of delivering home starting in the high $200,000 to low $300,000 range, but I think that’s scaled up to the high $400’s and low $500’s on the lower end, all the way to around $1.5 million on larger lots,” Siefert said.

See the original article at: https://www.bizjournals.com/sanantonio/news/2024/03/08/price-sensitive-market-master-planned-communities.html