While renters in San Diego may face higher costs, they benefit from the city’s mild year-round climate and myriad lifestyle offerings, according to Doug Ressler, manager of business intelligence at Yardi Matrix.
New lease asking rents were at $2,699 in March, up 0.9% year over year. According to Ressler, he expects rents to continue to decelerate due to the new supply coming online. Yardi Matrix forecasts that the average rental rate will be $2,729 by the end of the year, a 0.1% year-over-year increase. In addition, occupancy is expected to hover around 96.5%.
“Overall, San Diego offers a robust rental market with a wide price range and a competitive environment, especially when compared to other major markets in California,” says Ressler.
As of March, renewal rent growth was up 5.1% year over year, with a monthly lease renewal rate of 58.5%.
Multifamily demand has remained positive, notes the company, with 831 net units absorbed in the 12-month period prior to April. This is down 506 units from 2023’s gain of 1,337 absorbed units.
For market-rate housing, San Diego is expecting to see 5,509 units completed, or 2.72% of its total stock, this year. Yardi Matrix’s forecast calls for 2,842 market-rate units to be completed in 2025, followed by 4,222 in 2026 and 3,884 in 2027.
Some of the largest communities under construction in San Diego include Pinnacle International’s Broadway Towers with 618 units, Trammell Crow Residential’s ALX Camellia with 531 units, and ColRich Multifamily’s Silo at Epoca with 510 units.
Looking ahead, Ressler says he is concerned about the lack of new housing supply for the renter-by-necessity and affordable segments. For affordable housing, Yardi Matrix forecasts 1,346 units to be delivered this year, followed by 722 in 2025 and 678 in 2026.
According to Ressler, Hines has halted construction on a massive mixed-use redevelopment of the Riverwalk Golf Club in San Diego until economic conditions improve. Once fully built, the development has plans for 4,300 apartments, including 430 for households earning 65% or less than the area median income, as well as office and retail space.
The current economic conditions and high interest rates also continue to impact multifamily transactions. As of April, in the prior 12 months, 10 properties were sold with the average sales price of $285,494 per unit.
“Rates will need to stabilize for loan origination, valuation, and development to adequately determine the long-term financial returns,” notes Ressler.
