Deliveries appear warranted. From a regional and national perspective, San Diego’s multifamily sector entered the second half of 2023 in a favorable position. Through the first six months of this year, the metro was the only Southern California market to register a drop in vacancy. The area is also home to the second-lowest Class A vacancy in the nation and holds claim to the third-tightest Class B and C rates among major U.S. markets. A record job count and median home price here, which exceeded $900,000 in June, are largely to credit for the strong, in-place rental demand. The delivery of more than 3,000 units in the second half, however, will test the metro’s standout rates. Fortunately, completions are relatively well dispersed, suggesting the impact of additions on overall vacancy will be moderate. This enables San Diego to end 2023 with the lowest vacancy among major West Coast markets.

Construction pullback underway downtown. While vacancy is below 4 percent in all of San Diego’s suburban submarkets, the CBD’s rate was 5.5 percent in June. Still, downtown has exhibited positive performance of late, with vacancy falling 30 basis points on a quarter-over-quarter basis in the April through June interval. The lack of additions — roughly 30 units over the past 12 months — has aided demand for existing rentals. Moving forward, two 300-unit-plus projects are slated to deliver all of a portion of their units this year; however, apart from these properties, the CBD’s pipeline is scant.

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