Developers are responding to the need for more apartments in the San Diego market. According to a statement from Yardi Matrix’s RENTCafé, the San Diego metro is on track to deliver 4,000 apartment units this year — 46 percent more than it did in 2017.
In addition, according to the firm, more than half of these units (about 2,700) will be located in the city of San Diego, responding to the demand for apartments in urban environments. The figure amounts to in increase of 25 percent more apartments being added this year than last year in this submarket, when about 2,200 units were delivered.
While Marcus & Millichap reports that some U.S. markets are facing a risk of apartment oversupply in pockets, San Diego does not appear to be one of them. The supply increase doesn’t seem to be dampening apartment rental-rate increases for the San Diego market, according to RENTCafé, which reports that rental rates increased in San Diego by 4.9 percent year over year in July, and the occupancy rate was at 96.5 percent, indicating that demand is still strong. (Click here for access to the full report.)
Even though multifamily fundamentals remain strong throughout the country and no less in California, Proposition 10 is still a concern for multifamily investors in this market, according to Real Capital Markets’ (RCM) 2018 Multifamily Investor Sentiment Report.
RCM’s report reveals that most investors in the survey are ready to buy but can’t find enough high-quality properties to purchase in the state. In a statement from the firm, COO Tina Lichens says, “Overall, the commercial real estate market — and particularly the multifamily sector — remains strong, with significant capital, both domestic and foreign, looking to be paced. The challenge for many investors is finding quality assets at reasonable prices.”