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Saturday, Jun 22, 2024

Apartment Vacancy Rates Expected to Languish

Two local commercial brokerage offices reported mixed reviews for the San Diego apartment market.

Marcus & Millichap Real Estate Investment Services and Cushman & Wakefield released third quarter reports that reflected an increase in sales transactions and higher occupancy rates from the third quarter a year earlier, but they also reported a slowdown in the number of units sold and anticipate a rise in vacancies due to area job losses.

According to Cushman & Wakefield, the number of apartment sales transactions was up in the third quarter of 2008 by 27.6 percent over the same quarter 2007. This was the first year-over-year quarterly increase since 2004. There were 111 apartment sales compared to 87 sales a year ago.

However, even though the number of sales in the third quarter increased, the number of units transferred has continued to decline, according to Cushman & Wakefield. The 1,849 units sold in the third quarter reflect a 19.3 percent decrease from the 2,291 units sold during the same period in 2007.

George Carlson, associate director with the San Diego office of Cushman & Wakefield, said this year he has seen a notable shift in activity away from major and institutional sales of 100 units or greater.

Carlson said that in 2007, 4,281 units sold in 21 sales transactions in the first three quarters and in 2008 just 1,293 units sold in eight transactions of 100 or more units.

He said investors, some of whom purchased property in 2007, are still waiting for price corrections.

Major sales in the third quarter include the sale of the 300-unit Cardiff-by-the-Sea Apartment Homes in Cardiff for $71 million, 113-unit Loma Portal Bluffs in Point Loma for $18.5 million and 112-unit Arbor Village Apartments on Logan Avenue for $13.7 million.

Although Marcus & Millichap predicts a soft apartment market at the start of 2009, it said San Diego will continue to post one of the nation’s highest occupancy rates at 4 percent.

Job losses across multiple sectors are expected to contribute to rising apartment vacancies, according to Marcus & Millichap.

The brokerage reported a 4.8 percent vacancy rate in Class A rental properties, and 3.7 percent in Class B and Class C.

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Returns On Plaza Investment:
Residents who believed in their neighborhood were rewarded.

Several hundred residents in the Diamond neighborhood in Southeast San Diego who invested in Market Creek Plaza on Euclid Avenue recently received a return on their investment. Area residents own 20 percent of the commercial shopping center built in 2006.

The nonprofit owner of Market Creek Plaza and the area residents that bought into the initial public offering a few years ago turned another 10 percent profit this year.

Market Creek Plaza was the vision of nonprofit Jacobs Center for Neighborhood Innovation, which works to change communities through entrepreneurial projects and fostering the creation of business.

Market Creek brought in $110,000 in profit for investors this year. Half of the area investors from neighborhoods including Chollas View, Emerald Hills, Encanto, Lincoln Park, Mountain View, Oak Park and Valencia Park chose to reinvest their dividends in future community development projects by JCNI.

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Gold Certification For Green Design:
The new $16.2 million Hunter Industries headquarters in San Marcos recently achieved gold LEED certification by the U.S. Green Building Council. Gold certification is the second highest honor for green and sustainable design.

Green or sustainable features include two photovoltaic systems installed on the rooftop that generate a combined 185 kilowatts of power, cool roof, daylighting and landscaping.

Smith Consulting Architects of San Diego served as the architect. Lusardi Construction of San Marcos was the general contractor. O’Day Consultants of Carlsbad served as the civil engineer with Teshima Design Group of San Diego as landscape architect.

Hunter Industries manufactures landscape irrigation equipment for residential, commercial and golf course use. The new facility will house its customer service, distribution, marketing and sales operations.

Send real estate, construction, design and urban planning news to Michelle Mowad at mmowad@sdbj.com. She may also be reached at 858-277-6359, ext. 3109.


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