San Diego Multi-Family Sector Set for Growth
San Diego’s Multifamily Sector Set For Growth In 2018
Driving down the I-5
corridor in San Diego one thing is clear: more than skyscrapers, cranes
dot the horizon. A lot of this construction is in the multifamily sector, which
has seen high delivery coupled with high demand, a trend that is expected to
continue throughout 2018.
Unit delivery totaled
6,200 units in 2017, compared with 4,300 in 2016. It is well-known that San
Diego needs more housing and therefore the fundamentals are strong in the
region.
Mission Valley, which is
updating its community plan, will triple its density over the next 30 years,
from 12,600 units to an estimated 35,100 units. Other big projects include the
proposed redevelopment of the 166-acre Qualcomm Stadium to SoccerCity, which
will be decided by voters in November and could add approximately 4,800
housing units.
Big changes are coming to
downtown neighborhoods, too. There are 39 multifamily projects under
construction or that had planned starts during 2017, according to a downtown
multifamily development pipeline compiled by CBRE. The report covers the East
Village, Little Italy, Civic/Core, Marina and Cortez Hill areas and the
estimated number of units under construction total 10,718.
Additional projects
included in an ancillary report, also from CBRE, show that countywide, 92
projects totaling 27,857 units were planned or started during 2017. At present,
4,838 planned starts are projected for 2018. Downtown San Diego, in particular,
has seen 20% growth in planned units since 2016, with 2,384 expected to be
constructed in 2018.
In addition to San Diego’s
housing shortage, growth can also be attributed to shifting preferences among
buyers and tenants. Another factor [for multifamily growth] is the embracing of
multifamily and mixed-use, not just among millennials but also by older folks
who want to downsize from large suburban family homes and live in walkable
neighborhoods.
This echoes the findings
of the Marcus & Millichap report, which cites diversified job
creation, household expansions, out-of-reach home prices and a growing
millennial base as reasons for the strong rental market in the San Diego
metropolitan area.
Area average rents
increased 6.7% during 2017 to $1,865/month. San Diego’s positive lifestyle
attributes, which include its temperate climate and strong job prospects in
biotech, life science and the military, will continue to inspire migration to
the region.
The Marcus & Millichap
report also showed all economic indicators in San Diego are up, with a 1.3%
increase in employment year-over-year along with increased construction,
population growth and home-pricing trends. As of 2016, the most recently
reported census year, the average per capita income in San Diego
County was $55,100, which increased by 2.2% from 2015.
The market faces specific
challenges, like affordability and availability. Residential projects and
specifically the increase in the number of homes increases the supply of
available housing. Mission Valley is currently anticipating 17,000 new homes
through the Mission Valley Community Plan Update, and other San Diego
communities will see an increase in housing supply.
Increasing supply at any
level will help, and variability in housing types such as affordable units
built as part of market-rate projects, senior housing and more multifamily are
all factors aiding in crossing the income spectrum.
Ultimately, more available
housing overall will benefit the full income spectrum. Due to a lack of
construction in affordable inland cities and coastal communities, investors
will be lured to places like El Cajon, Vista, Escondido and Pacific Beach in
search of construction opportunities, the Marcus & Millichap report
concludes. Class-C rents are up 15.9% from a year ago with affordable
areas like Mid-City/National City and Escondido registering 12.4% and 10.4%
increases, respectively.
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