SD Apartment Rents Hitting New Highs as Vacancies Decline

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By Thor Kamban Biberman, The Daily Transcript

Wednesday, April 1, 2015

The average monthly residential rent in San Diego County is pushing $1,600 per month, while vacancy is at its lowest point since 2008.

MarketPointe Realty Advisors reported that at the time of its March 2015 audit, the average monthly rent here was $1,575, compared to $1,448 per month in the like month a year earlier.

Russell Valone, MarketPointe president, said while the rents have hit new highs and vacancies are declining, considerably fewer people are doubling up in apartments today than five years ago.

Valone also said renters shouldn't be scared by the $1,575 figure.

"You can't just look at the average rent overall; you need to look at apartments that were constructed pre-1998. Those are renting for $1,429," Valone said.

The average vacancy rate hit 2.51 percent in March, dipping below 3 percent for the first time since 2008. The rate had been hovering in the 4.5 to 5 percent range earlier in the decade.

The late 1990s was the last time the vacancy rates were in the 2 percent ranges. A 5 percent vacancy rate is considered to be ideal.

The March vacancy rate is despite six new apartment developments totaling 1,290 new units opened since last September's audit.

The most recent apartment properties currently leasing include H.G. Fenton's 96-unit Urbana development in the East Village.

Recently, 27 units were available. The Urbana units range from 400 to 1,208 square feet and the rents currently range from $1,600 to $3,125 per month.

The average rent was $1,997 per month as of the March survey.

The next highest rents are in the North Coastal submarket with a $1,920 average. The East County, which has a preponderance of older units, avarages $1,286.

Leasing also got under way earlier this year at Alliance Residential's 340-unit Broadstone Corsair development in the San Diego Spectrum in Kearny Mesa.

That development features 648 to 1,251-square-foot units with rents ranging from $1,860 to $2,952. Sixty-one units had been leased at the time of the survey.

A third apartment property that opened for lease earlier this year was West Park at Civita, a Sudberry Properties development of 89 units ranging from 546 to 1,045 square feet and renting for $1,610 to $2,460.

According to Xpera Group's Alan Nevin, while luxury units and subsidized units continue to be constructed, virtually nothing is being built in the middle.

Valone said apartments with three bedroom floor plans are highly coveted, but the demand isn't being met.

"We're seeing more families going into two-bedroom units," Valone said. "Some of the townhomes that became rentals have three-bedroom floor plans, however."

Valone said although studio apartments also generally aren't being built, so-called junior units are a hybrid of a studio and one-bedroom apartment.

While luxury units are leasing well, MarketPointe said "vacancy rates are the tightest among older more affordable complexes where averages under 2 percent and even zero are not uncommon."

The vacancy rates range from a low of 1.53 percent along the state Route 78 corridor to 3.74 percent in central San Diego.

Downtown San Diego's March average is at 5.1 percent.

MarketPointe said there have been 31,627 new rental units added to the San Diego County rental marketplace since 1998.

Of those, 29,950 units or more than 95 percent have been absorbed.

Not all of these units remain in the rental inventory, however; some have been converted to for-sale units.

A total of 10,057 units, in 50 projects, have been identified as future market rate rental housing developments in San Diego County.

San Diego's central area will be the most active submarket with 5,392 units in the entitlement process, MarketPointe wrote.

The East County, Interstate 15 corridor and Highway 78 corridor submarkets each have fewer than 1,000 units in the pipeline.

Topics: Alan Nevin, CM/Development Services, RE, San Diego, Market Research


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