HOUSING DYNAMICS SIGNAL LONG-TERM TAILWINDS AS SECTOR EXITS RECORD STRETCH
Metro achieves notable accolade. Strong countywide demand for suburban rentals enabled San Diego to enter the second half of this year with the nation’s lowest vacancy rate. Spanning the past 12 months ended in June, renters absorbed 5,100 apartments outside of the CBD, with all 12 submarkets home to vacancy rates ranging from 1 percent to 2 percent. Responding to widespread tightness, developers broke ground on at least nine suburban projects during the first half of this year, lifting the active pipeline outside of Downtown San Diego to more than 8,100 units as of July. The metro’s $3,200 affordability gap — the difference between an average mortgage payment and the mean effective rent — suggests these luxury apartments should be well received, namely by higher-earning households and individuals being priced out of homeownership.
Concessions and brief lull in CBD completions aid existing units. Downtown San Diego-Coronado recorded the largest vacancy decline among submarkets over the past year, and was the only locale to note a decrease in unit availability during the first half of 2022. Heightened demand for luxury and mid-tier units is to credit, as during the recent 12-month interval, nearly 2,000 of these rentals were absorbed. Concession usage also played a role, with 30 percent of available units offering some type of incentive over the past year. Moving forward, the potential for near-term compression exists as the CBD’s active pipeline is comprised almost exclusively of projects slated to deliver units beyond this year.