The drive from Austin, Texas, to San Antonio is relatively short — about 90 minutes southwest on Interstate 35 — but the skylines of the two cities tell vastly different real estate stories. One's present may become the other's future.
That's because the area between the two cities — known as the I-35 Corridor — is one of the fastest-growing regions in the country, a burgeoning megalopolis that is projected to be home to as many as 7 million people by 2030, according to the Greater Austin-San Antonio Corridor Council.
Austin, the state's capital and home to the flagship campus of the University of Texas, currently gets much of the attention. It's become a darling of the tech industry, drawing big outposts for Google, Meta and other high-flying firms. As if to show off its status, it soon will have not one but two of the tallest towers in Texas rising above its skyline.
San Antonio's skyline is more modest, but the city is actually bigger, with nearly 1.5 million residents compared to Austin's 964,000, and that hints at its promise. Plans are being laid for a number of major projects that are beginning to get people to take a fresh look at the city.
One of those fresh looks? San Antonio just made its first appearance in the Top 10 on an influential list of the best markets for real estate investors, ranking No. 8 out of 80 cities on the annual “Emerging Trends in Real Estate” study that consulting firm PwC produces for nonprofit real estate research and policy organization Urban Land Institute.
The report named San Antonio in the "Super Sun Belt" category of markets that are "large and diverse but still affordable, forming powerhouse economies that attract a wide range of businesses."
Whether the city can follow in Austin's footsteps remains to be seen. The two markets that bookend the fast-growing I-35 Corridor remain very different. One reason is the cultural differences: San Antonio has long been home to major Air Force and Army bases, and it has strong connections to South Texas, while Austin brings more bustle, a higher-educated workforce and the higher cost of living that often follows it.
Metropolitan San Antonio is 56% Hispanic, one of the highest percentages in the country, with 42% of the population being bilingual, according to San Antonio's regional economic partnership. That compares with 32% for greater Austin's Hispanic population, still much higher than the national average of 19.1%, according to the U.S. Census Bureau.
"San Antonio is very different, we tie much more into South Texas, tie into Mexico ... whereas Austin has a tie in to North American cities,” said David Robinson Jr., the son of one of the city's NBA legends, David Robinson Sr., and a development manager with Weston Urban, a longtime developer in San Antonio.
Austin's skyscrapers illustrate the differences. Construction of the 66-story Sixth and Guadalupe mixed-use tower, where Facebook parent Meta preleased all of the 865-foot-tall tower's office space, is almost complete in downtown Austin, while the Waterline at 1,022 feet tall and 74 floors broke ground last year a few blocks away.
San Antonio's skyline is less dramatic, more a reflection of its place as a sprawling bedroom community. But, like Austin, San Antonio appears poised for a growth spurt that could make it a contender for institutional investors. Metropolitan San Antonio's population is forecast to reach 3.8 million by 2040, making it bigger than San Diego, according to greater:SATX, the regional economic partnership for San Antonio.
Robinson said San Antonio, Laredo, Texas, and other South Texas cities such as Brownsville and McAllen represent a growing economy that could be an attractive opportunity for local and national investors alike.
“I believe San Antonio and South Texas embody ‘the future of the South’ and that is our competitive advantage as a city," Robinson said. "We legitimately can make a claim that, as a region, San Antonio and South Texas is one of the biggest producers of truly new talent in the nation. This could be defined as first-generation college graduates, generational income-level growth, or a similar set of stats, but our area has the greatest potential for socioeconomic mobility in the nation.”
Downtown Revitalization
While downtown San Antonio is “a little behind other cities” in terms of businesses moving to its central business district, one thing that works for the urban core is its historical context, which complements the city's personality, said Carter Thurmond, a managing director at Transwestern’s Austin office, and a native San Antonian who does business in the area.
After all, the city's most famous building is the Alamo, a replica of a fort that was destroyed almost 200 years ago in a battle for Texas independence.
San Antonio-based developer Weston Urban plays off that history in its latest projects as it attempts to make downtown San Antonio more livable and a place where people want to work and visit.
Weston Urban has launched work on the Continental Block Development, where it plans to renovate three historic structures and build a 16-story residential building on a 1.9-acre city block. The Continental Hotel, built in 1896, is set to be renovated to include residential units and ground-floor retail, and the 1926-built Arana Building is poised to be converted for retail and office tenants.
Nearby, Weston Urban topped off construction of 300 Main earlier this year, which, at 32 stories, is in line to become the city's tallest residential building.
“A great city requires a great downtown,” said Mark Jensen, vice president of multifamily for Weston Urban, in an interview with CoStar News.
In addition, San Antonio's first Kimpton Hotel is preparing to open in the downtown area in late 2024 as part of an adaptive reuse of an 1850s schoolhouse.
Generational Town
It's common for developers with plans for San Antonio's downtown to want to “build projects that our kids come back to," Jensen said. That's because San Antonio is a “fiercely local” city where people take pride in a city developed by its own, he said.
Austin, by comparison, is more transient. Austin used to be a sleepy college town decades ago before major tech companies invaded the city, looking for tech graduates from the University of Texas and making the city rank among the top of several recent lists for institutional investors.
The generational nature of San Antonio has often translated to everything staying local, and why the city might not get on the radar of outside institutional investors.
“We’ve seen more institutional investment in San Antonio, but [it's been] in the suburbs, and that’s based on availability and space,” said Jensen.
For example, Charlotte, North Carolina-based Big V Property Group made its first purchase in Texas in 2021 when it bought The Rim, the largest open-air shopping center in Texas, in northwest San Antonio through a partnership with Kimco Realty Corp. and Equity Street Capital.
And, Nashville, Tennessee-based Ryman Hospitality Properties bought the JW Marriott San Antonio Hill Country Resort and Spa, located about 20 miles northeast of downtown San Antonio, earlier this year from Blackstone Real Estate Investment Trust for $800 million.
But Jensen thinks institutional investments in San Antonio could increase with an uptick of new urban projects focusing more on signature designs specific to the Alamo City.
Changing Economy
San Antonio has a large active military population and is home to the Department of Defense’s largest medical center, which has been a longtime influence on the type of business being done in the city. San Antonio has four major military installations, all part of Joint Base San Antonio, which directly employs about 74,300 people in the region, according to the greater:SATX regional economic partnership.
However, San Antonio is diversifying its longtime economic mainstays of military and tourism by adding aerospace, bioscience, cybersecurity and advanced manufacturing to the mix.
For example, U.K.-based JCB, the world's largest privately owned manufacturer of construction and agricultural equipment, picked San Antonio to build its second and largest North American manufacturing facility, marking the region's largest single investment in over 20 years.
JCB plans to build a 720,000-square-foot factory on 400 acres on the south side of San Antonio, creating 1,500 jobs in the advanced manufacturing industry and representing a $265 million investment, according to a statement.
Another project transforming San Antonio's south side is Brooks Air Force Base, a former military base that is being converted into a 1,306-acre mixed-use development.
San Antonio has also benefited from an increase in college students from outposts of the state's two largest public university systems: Texas A&M University–San Antonio and the University of Texas at San Antonio.
A&M-San Antonio had record enrollment with more than 7,300 students in 2022, up nearly 130% from the 3,210 students enrolled in 2010. Meanwhile, enrollment at the University of Texas at San Antonio was up nearly 13.5% between 2010 and 2022, when it had 34,300 students, according to its website.
Weston Urban's Robinson hailed San Antonio as a “very young city” because of its college population. “San Antonio has more college students, there is a lot of energy around sports,” he said.
All in all, San Antonio is becoming an appealing city for investment and growth, said Transwestern's Thurmond.
“The fundamentals are in place. It’s an emerging market. There are challenges across the board to get comfortable with San Antonio, [but] the appetite is there," Thurmond said.