Source: Costar, September, 2020Even with the Covid-19 turmoil, apartment vacancy in San Diego is not expected to exceed 6%. In our interviews with apartment managers, they indicate that vacancy and turn over issues are specific to the market area and property, with the coastal areas experiencing minimal if any impact. The brokerage and lending communities are still adjusting and adapting to the rent control measure that took effect in January of 2020 that limits annual rent increases to 5% plus local inflation (7.2% for San Diego in 2020). Most apartment sales marketing flyers and offering documents still look to rents on turnover. While apartment appraisers now must look to upward trended rents and estimate that probable turnover rates for apartment properties. Apartment construction costs in San Diego County have been ranging from $270.00 to $300.00 per square foot for replacement costs, which means higher apartment insurance premiums or risking being under-insured should anything happen to your property. Apartment management fees are still ranging from 7% to 8% for most properties. Apartment management fees have not rolled back despite the substantial rental increases over the past few years.
The Southern California Rental Housing Association released its apartment rent and vacancy survey this past month. The publication reported that the City of San Diego apartment vacancy rate was at 4.3%, which is up from the same time in 2018, when the rate was 2.9%. It should be noted that apartment vacancy rates are seasonal tend to be lower in the spring and higher going into the fall. The average City of San Diego one-bedroom apartment rents were reported at $1,292, two-bedroom units at $1,850, and three-bedroom units at $2,407 per month. The report noted that apartment occupancy was more evenly distributed county wide relative to the past, as all apartment property owners are benefitting from this period of very strong demand and limited market inventory.