Q4 2022 Multifamily Real Estate Report: San Diego, CA
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
San Diego is known for its picturesque beaches, warm climate, and other world-renowned attractions. The population in the city for 2022 was about 3.3 million at a growth rate of 0.70%. The unemployment rate for San Diego reached 3.0% in December of 2022.
San Diego’s multifamily market experienced a strong fourth quarter, with increases in average rents, sales volume, and sales price per multifamily unit.
General Area Overview & Demographics
San Diego is the second-largest city in California. Over half (53%) of the population identifies as Hispanic or Latino, followed by non-Hispanic white at 28%. African Americans make up 7% of the population, Asian Americans 6%, and Pacific Islanders 0.4%.
San Diego, CA Median Household Income & Population
In 2021, the median household income in San Diego was estimated to be $86,957. The per capita income was estimated at $50,940. The majority (68%) of households earn between $50K and $149,000 annually. Those earning less than $35,000 account for 16% of all households, and those earning more than $150,000 account for 16% of all households. As of Q1 2023, San Diego is still one of the most expensive places to live and work in.
The majority of the population in San Diego is between 24 and 64 years old. People ages 18 to 23 makeup 11% of the population, while those 65 and older comprise 12%. The median age for the city as a whole is 33 years old.
Four major universities are located in the city: The University of California, San Diego (UCSD); San Diego State University (SDSU); Point Loma Nazarene University; and the University of San Diego. There are also numerous community colleges and research institutions in the region.
Many popular tourist attractions are located throughout the city, including Balboa Park, the San Diego Zoo, SeaWorld, and Legoland. The region also boasts several beaches, boardwalks, and outdoor activities for visitors to enjoy.
San Diego typically experiences mild, sunny weather year-round. The region’s Mediterranean climate is characterized by hot summers and mild winters. In the summer months, temperatures range between 70F and 85F (21C and 29C). During the winter months, temperatures typically stay between 55F and 65F (13C and 18C).
Summary of San Diego Multifamily Real Estate Performance in Q4 2022
Vacancies for San Diego multifamily increased to about 3.5% in Q4 2022, the first time multifamily vacancies in San Diego grew in nearly 12 months.
Combined vacancies for Class B and C multifamily properties was approximately 1.7% in Q4 2022.
What are multifamily rents like in San Diego?
Asking rents for San Diego multifamily real estate rose about 1.8% quarter-over-quarter to $2,327 per month in Q4 2022, one of the most expensive in the nation.
Class A asking rents rose 3% in Q4 2022 and reached an average of about $2,790 per month.
Purchase & Leasing Activity
The median sales price per multifamily unit reached $358,900 in 2022, a 12% increase year-over-year. Sales volume doubled quarter-over-quarter from Q3 to Q4.
The overall sales volume for the year, however, decreased 28% year-over-year.
Notable Multifamily Real Estate Deals in San Diego in Q4 2022
There were several notable deals that took place for San Diego multifamily real estate in Q4 2022:
- Domain San Diego had 379 units sold for $184.6 million.
- Veranda La Mesa had 406 units sold for $141 million.
- The Residences at Escaya had 272 units sold for $122.5 million.
- Madera Ridge had 236 units sold for $86 million.
These are select examples among other activity.
New Multifamily Real Estate Development Activity in San Diego in Q4 2022
320 units of new delivery came online in Q4 2022, and 3,200 units were delivered for the year, a 43% increase year-over-year.
Nearly 4,600 units of new construction were being added to the pipeline at the close of 2022.
Market Forecast for San Diego’s Multifamily Real Estate Market
Nearly 3,000 units are expected to be delivered in 2023. Vacancies are expected to increase in the coming year as new deliveries exceed absorption rates.
Renter demand is expected to remain steady. This is projected to push asking rents to rise by 3% to approximately $2,400 per month.
Takeaways for Multifamily Real Estate Investors
Investors are likely to be drawn to San Diego’s multifamily market in 2023. The market has remained consistently strong and less volatile than others amidst economic uncertainty and the Fed’s battle against inflation.
There’s been diverse investment activity across Class A, B, and C properties in the past year, and this is projected to continue throughout 2023.
Do your research, stay diligent, and happy investing.
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