Web Posted: 10/17/2006 09:20 PM CDT

San Antonio Express-News

For two decades, the lament was loud and constant whenever the question arose about why so little investment was being made in downtown San Antonio housing.

No downtown grocery store meant low demand for downtown condominiums and apartments.

The opposite was true, too. Low numbers of downtown residents meant that a downtown grocery, even one half the size of suburban stores, would fail.

This Catch-22 apparently blasted apart in the past year or two. It seems an additional downtown residential project is announced nearly every month. If a downtown grocery store is on a drawing board anywhere, though, it’s a deep, dark secret.

The new wave of downtown residential developers has adopted a brave attitude: To heck with grocery stores, full speed ahead.

“If residential is built, the retail will follow” is the way Ed Cross of Cross & Co. put it to a packed Central Area Business Council luncheon last week.

“I don’t want a grocery store. We don’t need one downtown,” said another developer, James Lifshutz, currently building or planning three downtown projects.

Small produce and meat markets are already there, and more stores will materialize as necessary as residential populations rise, added Lifshutz, of the Lifshutz Cos.

Cross plans a $46 million, 246-unit apartment development called the Vistana, near Market Square. He has set aside 15,000 square feet that he hopes will be occupied by a drugstore. Drugstores these days often offer fresh produce and meats along with other traditional grocery items, he noted.

The idea that people who live downtown desire a car-less lifestyle was pooh-poohed by a partner of a 22-story downtown condo tower, the Vidorra near St. Paul Square, now in the preselling stage.

Jeff Rochelle said grocery delivery services will arise as downtown populations grow, but residents will still own cars. “They still will get out and drive. They want rapid access to freeways,” Rochelle said.

Cross, who recently switched from real estate broker to developer, said the demand for downtown housing has barely been scratched.

Downtown demand typically accounts for 5 percent to 15 percent of a metropolitan area’s households. In San Antonio, that would put central business district demand at 30,000 to 90,000 units. Downtown San Antonio now has only about 2,500 units, he said, for 5,000 to 6,000 residents.

Downtown may not be ready for 30,000 apartments or condos, but it is easy to see why the developers believe demand justifies their projects.

San Antonio’s central business district, after all, already possesses amenities that many cities can only envy.

The River Walk, the arts district theaters, parks, HemisFair Plaza, Rivercenter mall and its movie theaters, the Nix Medical Center, Christus Santa Rosa Hospital, doctor offices, VIA Metropolitan Transit and its downtown circulating streetcars, and the San Antonio Museum of Art (with at least two other downtown museums planned) provide all the cornerstones for a livable downtown.

A grocery store once seemed a necessity. Now? Who needs it?

Downtown developers certainly don’t.

Jennifer Hiller
Express-News Business Writer

As the national real estate market sputters like a car on the way to a breakdown, San Antonio home sales remain robust.

One sign of the city’s good health: 150 to 175 new real estate agents stampede into the market each month.

More homebuilders, too, are arriving in San Antonio — albeit at a much less frenetic pace — vying to build a share of the 18,000 new homes anticipated this year.

In the past four years, the membership of the Greater San Antonio Builders Association has grown from 500 to 1,170 members, said Becky Oliver, executive vice president.

And while 2005 was a record year for San Antonio real estate — a year the industry relished as a once-in-a-lifetime boom — 2006 still shows every sign of breaking those records.

Eddie Gammill, division president for Stewart Title of San Antonio, receives two to three calls a week from builders looking to move into the San Antonio market.

He attributes their interest to the Fortune magazine story in December that pegged San Antonio as the nation’s best real estate market for 2006, with a projected 8.3 percent appreciation rate.

“The good news is everyone knows about us,” Gammill said. “The bad news is, there goes the neighborhood.”

A recent orientation session for new real estate agents at the offices of the San Antonio Board of Realtors was full.

“Have you had trouble parking?” asked Barbara Tarin, board chairwoman. “If you run into a problem like that, just smile. It’s a really good problem to have.”

San Antonio had 7,400 real estate agents in August, a 32 percent increase since August of last year.

“There are people making more in their first year than I did in my 20th year,” said Ron Smith, education director at the Realtors board, who received his real estate license in 1978.

Jennifer Beaudet moved to San Antonio from San Diego three months ago, leaving behind a teaching career to join her best friend in the real estate business.

The flexibility, the income potential and San Antonio’s good market attracted Beaudet. But there are other benefits.

“Here you can actually afford a home,” she said.

New real estate agents say they’ve paid at least $1,500 to $3,000 in start-up costs for things like business cards and marketing materials.

But builders face much steeper entry costs and enter into a market more slowly.

“It’s a capital-intensive business,” said Norman Dugas, a residential developer and president of Dugas Diversified Developments.

Lot availability is at an all-time low in San Antonio, so builders who can pay cash for large numbers of lots in another’s development have an advantage over smaller builders, who often must rely on financing for fewer lots, Dugas said.

Finding land and developing it into a neighborhood is another option, but it’s difficult.

It takes at least 18 months to turn raw land into lots ready for homes — a timeframe that forces builders to consider the market for the next two to five years.

Still, many builders are willing to try, and he said there’s opportunity.

“You can’t help it. You see the job growth,” Dugas said. “I guess you could say at the normal glacial pace that real estate moves, anyone walking is in a rush to get into the market.”

Several of the nation’s largest homebuilders — including Toll Brothers, KB Home, Pulte and Ryland — already have San Antonio offices. But several large regional builders have also been staking a claim here.

Among them, Dugas said, is Gehan Homes, which builds 1,200 houses a year in the Dallas, Austin and Houston areas, and has secured land in San Antonio for the first time.

Randall Allsup, manager of the San Antonio division of Metrostudy, a residential real estate research firm, said new builders continue to try to get a foothold in the market because even though a record number of homes are being built, supply is tight. Homes are selling quickly.

“Everyone feels like the sky is falling across the country, but locally things are still looking good,” he said.

Mortgage interest rates have stayed low, which has convinced fence sitters that it still might be time to buy a home, he said.

But San Antonio can’t completely avoid the ripple effect of the national real estate slowdown. Allsup said a crash on the East or West coasts would lower consumer confidence in San Antonio.