M A R K E T H I G H L I G H T: S A N D I E G O
24 • September 2015 • Western Real Estate Business www.REBusinessOnline.com
It is a great time to be a multifam-
ily owner in San Diego. Vacancies
are at the low rate of 4.1 percent for
the county, while rent growth is at its
highest level since 2011. Cap rates and
interest rates are still at record lows,
and we are slowly seeing an increase
in inventory as owners realize values
are higher than ever. We will soon see
a rise in interest rates, and can expect
a reduction in values as the cash-on-
cash returns are reduced. For every
100 basis points of increase in rates,
we may see up to a 6.7 percent reduc-
tion in value.
Rental market performance, accord-
ing to the San Diego County Apart-
ment Association, has weighted aver-
ages in San Diego up to:
$974: Studios
$1,301: one-bedroom
$1,609: two-bedrooms
$1,943: three-bedrooms
South Bay has the highest vacancies
at 5.1 percent, while North County has
the lowest at 3.1 percent. Chase, one
of the largest lenders in San Diego, is
expecting rent growth of 35 percent
over the next fve years. This news is
encouraging as the market has been
fat in San Diego for years.
There were 139 apartment buildings
with 50 units or less that sold in the
past quarter. Cap rates, meanwhile,
are averaging 5.1 percent. With that in
mind, we expect an increase in avail-
ability over the next six to 12 months.
This availability increase, paired with
higher rates, may result in a slight de-
cline in values.
San Diego is currently ranked
seventh in the nation for rapid rent
growth. This growth is expected to be
at 4 percent, while the vacancy rate is
expected to be 2.9 percent by year-end,
according to a report by Freddie Mac.
Demand will remain strong this
year, as the Millennial generation
has shown they're more likely to rent
than buy. About 75 percent of current
Downtown residents are renters. With
the Millennial desire to live a "work
hard, play hard" lifestyle, it's no won-
der there is such a large population of
this group in the Downtown area.
Millennials may also be the catalyst
for the emergence of new complexes in
urban areas that are rich in amenities
and cater to smaller household sizes
of about 1.55. Restoration construction
has become a huge trend, and we're
seeing lots of properties like boutique
hotels and historic buildings being
transformed into apartments com-
plexes.
The future for multifamily is bright
in San Diego. The economy is expected
to grow by 3 percent this year and, due
to the lack of available land to develop,
we will not see the kind of overbuild-
ing that is expected in several other
same-size metropolitan markets.
MULTIFAMILY INVESTORS ARE SITTING PRETTY IN SAN DIEGO
Jack Nooren
Vice President,
NAI San Diego
Know Like Trust
Western Region Members
Commercial Realty Advisors NW
Oregon
George W. Macoubray
503.274.0211
george@cra-nw.com
Commercial Retail Associates
Central California
Sam T. Bogdanovich
559.650.1308
sbogdanovich@retailassociates.com
De Rito Partners
Arizona
Craig Esslinger
480.834.8500
craig.esslinger@derito.com
Epsteen & Associates
San Diego & Imperial Counties
Nancy Johnston
858.536.8383
njohnston@epsteensd.com
Leibsohn & Company
Washington
Ronald Leibsohn
425.455.1777
rleibsohn@leibsohn.com
Lockehouse Retail Group
San Francisco
Steve Cutter
650.692.3400x2672
scutter@lockehouse.com
Maestas & Ward CRE
New Mexico
Debbie Harms, CCIM
505.998.1560
debbie@gotspaceusa.com
May Realty Advisors
Los Angeles & Ventura Counties
Matthew May
818.528.3999x1
matthew@mra.la
Progressive Real Estate Partners
San Gabriel Valley, San Bernardino
& Riverside Counties
Brad Umansky
909.230.4500
brad@progressiverep.com
ROI Commercial Real Estate
Nevada
Dan Adamson
702.363.3100x112
dadamson@roicre.com
The Weitzman Group
Texas
Robert Young
214.954.0600
byoung@weitzmangroup.com
Thorton Oliver Keller CRE
Idaho
Michael J Ballantyne
208.947.0831
mjb@tokcommercial.com
The Zall Company
Colorado
Stuart Zall
303.804.5656
szall@zallcompany.com
THE RETAIL BROKERS NETWORK HAS BUILT ITS REPUTATION AND SUCCESS ON THE EXPERTISE OF ITS MEMBERS KNOWLEDGE OF THEIR LOCAL MARKETS
Historical Vacancy Percentage
San Diego County
Historical Price Per Unit
San Diego County
Historical Number of
Apartment Transactions
San Diego County