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Rents to jump over next five years
By Jonathan Horn
Over the next five years, rents in San Diego County are expected to rise almost twice as fast as they did in the preceding decade, according to projections by CBRE.
From 2004 to 2014, the average rent in San Diego County rose from $1,242 to $1,542 per month, a 24 percent increase. By 2019, the average rent is expected to hit $1,830 per month, 19 percent more than the current average, said Dixie Hall, a CBRE apartment specialist.
“If we weren’t under supplied, we’d have much higher vacancy and we wouldn’t be seeing the rent raises that we are,” Hall said. “And we wouldn’t be seeing people paying $2,000 for a one bedroom.”
Speaking to about 200 people at a panel held Thursday by the San Diego County Apartment Association and the Certified Commercial Investment Member San Diego chapter, Hall said demand for rentals has increased because of three major factors: millenials are moving out of their parents’ homes, previous homeowners now choose to rent, and others still have credit issues from the Great Recession and can’t qualify for a mortgage.
The vacancy rate in San Diego County is about 3.7 percent, below a stable market, which would have vacancies around 5 percent, said moderator Robert Vallera, senior vice president of VOIT real-estate services. Another report, released Thursday by Cassidy Turley, calculated San Diego County’s vacancy rate as 2.6 percent, second lowest in the nation after San Jose.
CBRE reports that it is tracking 8,600 new units under construction, with 1,600 of them downtown. That’s where most of the demand for new units exists, said Peter Burley, who directs the Rosenthal Center for Real Estate Studies of Chicago.
“The millenials are distinctly urban, preferring public transportation, walkable neighborhoods, flexible work environments and easy access to social interaction,” he said. “They don’t drive.”
Hall said the new units being built, while expensive, are highly amenitized, with fire pits, pool decks, barbecues, large gyms and clubhouses. “You would want to live in these properties,” she said. “Residents today want to socialize, they want to be outside, they don’t want to be trapped in their apartment.”
Marco Sessa, senior vice president of Sudberry Properties, in charge of the expansive Civita mixed-use community in Mission Valley, said developers have a hard time responding to the demand for more units.
“It’s almost impossible to get things approved and it takes a very long time,” he said. “Unfortunately even with the amount of deliveries that are expected in the next few years, it is by far the demand exceeds the supply, not because we don’t want to build it but because it’s very difficult to get those projects actually out of the ground.”
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