Steady Eddie is the forecast for San Diego’s apartment market for 2021, much as it was last year, according to the commercial brokerage firm JLL.
‘You’ll some new supply come to market, albeit not as much as we need,” said Kip Malo, senior director of JLL’s Multi-housing Capital Markets.
“If you look at San Diego, for years and years and years, we’ve been known as the Steady Eddie market. I think 2020 is very reflective of that,” Malo said.
Investor confidence in the San Diego rental market comes with the development of several large projects.
Among them, Trammel Crow Residential is building a 284-apartment project in Mission Valley, MoutainView Real Estate has a 135-apartment complex going in Chula Vista, and Hines is moving forward on its $3 billion mixed-use project in Mission Valley that will include 4,300 rental apartments.
Holding its Own
Considering what happened elsewhere during the COVID-19 pandemic, San Diego did far better than most when it comes to multi-family housing.
Malo said rents in San Diego rose about 1.5% last year compared to San Francisco, where they dropped 20%, and Los Angeles, where he said rents slid 7%.
“San Diego held its own and was really treading water,” Malo said.
Suburban markets have been doing better than the urban core, as people sought more space as a result of cooped up during the pandemic and tenants looking for more affordable housing.
A trend that Malo sees continuing into 2021 is a shift away from pricey luxury apartments to more affordable apartments, although rents are by no means inexpensive in much of San Diego County.
Zumper, an apartment listing service, pegged the average monthly rate for a one-bedroom apartment in San Diego at $1,800 in February.
Coronado had the most expensive monthly rents in San Diego County in February – $2,820 for a one-bedroom apartment, according to Zumper.
El Cajon had the least expensive at $1,330.
Malo said developers are starting to respond to the market demand for more apartments that middle income families can afford.
“They’re willing to build projects to the next level down,” Malo said. “There is a shift by investors and developers to move back to the suburbs. You see more demand for developers to do that.”
The shift has led to a surge of construction in the suburban markets, such as Carlsbad and Vista.
In Vista, for example, StreetLights Residential built an apartment and townhome complex with 126 units – the company’s first project in San Diego County.
Escondido also has several apartment projects pending, including the transformation of the former Palomar Health hospital in downtown Escondido into a mixed-use project with 345 apartments, 90 of which are targeted for people over 55.
“The shift toward more affordable construction generally means groups are looking further out,” Malo said. “North County is doing very well from a rent growth standpoint.”
Nationally, JLL reported in its Vision 2021 outlook for the coming year that the demand for more affordable housing brought on by the pandemic could make 2021 “the turning point in solving the affordability housing crisis.”