San Diego MSA Multifamily Market 2016 Steady as it Goes

PHOENIX - Jan. 27, 2017 - PRLog -- The San Diego MSA multifamily market, unlike other areas of California and the West more prone to the speculative fits of the boom and bust cycle, has been a consistent performer in both good and bad economic conditions.  Whereas many Western markets suffered from decreased rents and occupancy during and after the 2008/9 Great Recession, the San Diego MSA, on the whole, maintained rents with relatively mild occupancy contractions.   Although 2016 was less active, in terms of overall sales volume when compared to 2015, the region continued to perform well and saw continued, albeit muted, increases in both jobs and population.

San Diego Market Metrics: By the Numbers

The MSA's total sales volume (5+ unit properties) decreased (12.5%), year-over-year, to $2.8Bn across 427 total transactions with 11,782 total units sold.  5 to 49 unit properties witnessed a 6% year-over-year increase in sales volume rising to $899M.  Additionally, 5 to 49 unit properties saw the highest increase in y-o-y sales price per unit amounts rising 22% to $210,358.  50+ unit properties, on the other hand, saw a significant decrease in sales volume declining (19%) y-o-y to $1.9Bn, additionally average sales price per unit amounts contracted (6%) to $255,317.

The East County submarket saw the most dramatic increase in total sales volume rising 67% to $571M and was 2^nd in the region for average sales price per unit rising 37% to $214,477/unit.  Metro San Diego submarket which accounted for just under half of the MSA's transactional volume, increased 29% to $1.37Bn in total sales.  Additionally, Metro San Diego narrowly bested North County Coastal with the highest averages sales price per unit rising 41% to $274,070/unit.

In regards to new construction, San Diego MSA had 3,539 new units delivered in 2016 which is well above both the region's 20 year average and is the most deliveries since 2005.  Despite elevated construction delivery schedules both average rent and occupancy increased for the MSA, by 6.3% to $1,741 and 1.5% to 96.9% respectively.  The Metro San Diego submarket once again retained the #1 spot for highest average rent paid rising 4% to $1,965.  North County Inland saw the highest percentage increase in rent rising 7.8% to $1,579 while East County leapt ahead of North County Inland to retain the top spot for occupancy currently at 97.4%.

Market Comparisons

The San Diego MSA when compared to other Western MSA's is an average of 8% above peak 2007 sales price per unit amounts which retreated (18%) from 2015's high $260,304/unit.  San Diego has, over the years, performed better in terms of both occupancy and rents than the other compared markets.  As such, it is not surprising that San Diego was the first to experience investor resurgence following the Great Recession.

The Road Ahead

As stated in our 2017 Market Forecast, it is unlikely the Fed will continue its announced interest rate increases in 2017, having stated so the previous two years with nary a hike made.  Despite this assessment, 2017 should prove to be a highly volatile year especially in international markets, i.e. Europe and Asia.  The EU, already in a precarious state over Brexit and the Italian Referendum, will see continued instability and uncertainty especially with both German and French elections just on the horizon.  Asia, and specifically China, has and will continue to see reduced growth with various asset bubbles in danger of bursting.  The net result will be continued capital flight from both regions to more stable areas in the West.

San Diego is poised for continued economic gains, comparative to the region, as both people and businesses have headed south down the coast.   As of December 2016, San Diego had the 2^nd lowest unemployment rate in California at 4.2% trailing only San Francisco at 2.8%.  Given the recent change in US political affairs, San Diego stands to benefit if the proposed increases to defense spending actually materialize.  2017 should see continued strength, however with projected completions expected to double by the end of year (approximately 7,000 units) both occupancy and average rents could see minor contractions as these new units come online.

To view the entire report please go to: http://abimultifamily.com/abinsight-san-diego-msa-multifamily-2016-year-end-report/

ABI Multifamily is the Western US's leading multifamily brokerage and advisory services firm that focuses exclusively on apartment investment transactions. The experienced advisors at ABI Multifamily have completed billions of dollars in sales and thousands of individual multifamily transactions. ABI Multifamily incorporates a global approach with regional real estate expertise to successfully complete any multifamily transaction, regardless of size and complexity.