According to Berkadia’s first quarter report, the San Diego market is exceeding 2022 forecasts in every category. The metro’s overperformance is attributed to its downtown submarket’s strong appeal to renters. Downtown San Diego has a steadily growing economy and offers relative affordability compared to other coastal Southern California markets.
In the first quarter alone, average monthly effective rent for the metro increased 2.8% to $2,510 and occupancy grew 10 basis points to 98.7%. Rising rent and occupancy rates are partially due to persistent demand outpacing deliveries of new supply.
Between January and March 2022, nearly 1,090 new apartment units came online. Simultaneously, net absorption exceeded 1,230 units. Renters targeted the Downtown San Diego/Coronado submarket with over 630 net units absorbed as more than 200 units came online in the first quarter of 2022.
Downtown San Diego is the business center of the metro with 14.3 million square feet of office space. More workers are returning to the office, with occupancy rising in the first quarter of 2022 and creating more demand for housing in downtown.
The strength of downtown is reflected across Greater San Diego’s economy, which is attracting new residents to the metro. In LinkedIn’s 2022 Guide to Kickstart Your Career Report, San Diego was ranked in the Top 10 Best Cities for College Graduates and Career Changers. With entry-level hiring growing 11.0% annually, San Diego ranked eighth and was the standalone city from the west coast on the list. Beyond entry-level hiring, overall employment rose 0.7% across the metro from January to March 2022.
More residents can capitalize on the job opportunity and move to San Diego as the market continues to offer the most affordable effective rent among Southern Californian areas that includes Los Angeles County, Orange County, and Ventura County. At $2,510 in the first quarter of 2022, renting in the San Diego metro presents a 6.8% discount compared to the average effective rent of the other coastal markets.
-Berkadia Research