San Diego’s countywide apartment vacancy dipped from 4.64 to 4.43 percent between September and March as the average rent edged slightly higher from $1,357 to $1,361 per month during the same period, according to a real estate information company.
A MarketPointe Realty Advisors report indicates that while the rental increases appear to have flattened out, they continue to hit new highs.
The last time rental rates dipped was in March 2010, but that decline was a minimal 0.65 percent.
The San Diego-based company’s report said while the apartment market isn’t superheated like it was in the early 2000s, when the average vacancy rates stood at 2 percent and less, the market continues to strengthen.
Unit vacancies could be found in a narrow range regardless of where they were in the county. They ranged from a low of 4.32 percent in the San Diego Central area to a high of 4.64 percent in the Interstate 15 Corridor.
As a 5 percent vacancy rate is considered optimum by the industry, demand here is still outpacing supply. Although this is true today, new construction could change the dynamic.
“Though rates have been trending downward over the past few audits, with nearly 2,000 units in eight projects currently under construction in the county and a significant portion of those units anticipated to enter the marketplace in 2012, we expect the vacancy rate to increase modestly in our September 2012 audit,” MarketPointe writes.
Russell Valone, MarketPointe president, said even with the units coming online this year, he doesn’t expect the vacancy rate to climb much higher than 5 percent.
“If there is a jump it will be temporary,” Valone said.
Looking ahead, a total of 11,863 units in 58 projects have been proposed in San Diego.
While not all of these are expected to be constructed, they could have a significant impact on the market if just half of them were built. Still, Valone emphasized that however many units are developed in 2013, 2014 and later, it’s not as if they would be coming all at once.
Most of the units are destined for the heart of the county.
“The San Diego Central submarket will be the most active, with more than 5,800 units in the entitlement process,” MarketPointe writes. “The East County, North County Coastal and Highway 78 Corridor all have fewer than 1,000 units in the pipeline.”
MarketPointe noted that units have been readily absorbed here. Of the 25,042 multifamily units that have been built since mid-1998, 23,916 have been absorbed for a nearly 96 percent rate.
The report points out while some of these units were converted to condominiums, it also should be noted that some developments such as the 679-unit Vantage Pointe development in downtown San Diego — originally a condominium — have converted to apartments within the past couple of years.
Meanwhile, although the vacancies varied little from submarket to submarket, there was much more of a range when it came to rents.
Those ranged from a low of $1,149 in the East County to $1,698 in a North County Coastal market that had a 4.64 percent vacancy despite the high rents.
MarketPointe notes that in many cases, people are doubling up in order to handle the payments.
The units with the most expensive rents were opened in 2010 with a $2,594 average. These units were actually more expensive than the average unit in 2011, which had a $2,594 monthly rental figure. Those units opened prior to 1998 had the cheapest average rents at an average $1,245.
The Interstate 15 Corridor posted the highest year-over-year rent increase at 3.33 percent. The rental rate in that submarket was $1,451 in March.
The South County increased the least year-over-year with a 1.6 percent figure. The average rent there was $1,205 this month.
The research firm, which restricts its surveys to apartment complexes with 25 or more units, examined properties from 122,626 units. Of that, 117,189 were leased and 5,437 were vacant. The average size of a unit this month was 868 square feet.
MarketPointe reported the lack of confidence in the for-sale housing sector coupled with continued echo boomer — under 35 years of age — population growth, will keep the demand high. This group tends to favor apartments, if they aren’t still living at home.
Valone said as the economy improves, echo boomers will leave home and those who are doubling or tripling up will move out on their own.
“As the economy gets better, Harry who is doubling up with his girlfriend Suzy and roommate Doug, will decide that he and Suzy will want a place of their own,” Valone said. “That kind of breaking up will have a positive impact on rental housing.”
Credit to San Diego Daily Transcript / THOR KAMBAN BIBERMAN