Developers exhibit confidence in future downtown demand. Home to one of the nation’s lowest Class A vacancy rates, San Diego appears well-equipped to handle a wave of new units during 2023. The metro’s downtown, however, may experience some volatility. After compressing to the mid-2 percent band in the early part of last year, vacancy in the CBD rose during each of the subsequent four quarters, despite a minimal number of supply additions. This movement placed downtown unit availability above its pre-pandemic benchmark, with the rental stock slated to grow by nearly 5 percent this year. These supply additions — specifically several large-scale projects in Little Italy and the East Village — will place upward pressure on vacancy and increase overall concession usage in the CBD.

Limited pipeline a boon for northern rentals. Accounting for onefourth of the metro’s rental stock, and home to three of the county’s largest cities, the North County market entered April in a position of relative strength. The area’s four submarkets — located along Interstate 5 and the 78 Corridor — each exhibited a vacancy rate of 4.0 percent or lower as of April, with less than 400 apartments scheduled for completion across these locations in 2023. Availability is extremely tight in budget-friendly Escondido, influencing households to browse units in San Marcos, Vista and Oceanside, where rates, on average, are $200 to $300 more per month, yet still below the metro mean. This will aid demand for North County rentals, allowing San Diego to maintain one of the nation’s lowest suburban vacancy rates.

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