Three Straight Months of Rent Growth
By Joshua Ohl
CoStar Analytics
April 2, 2024 | 7:30 AM
San Diego’s apartment market ended March on a strong note, with rents rising 0.4% for the month. That was the third straight month of rising apartment rents in San Diego, putting the losses in the second half of last year in the rearview mirror.
With the spring leasing season on the doorstep, rents rose 1% in the first quarter. While that was below the first quarter average of the pre-pandemic norm of 1.4%, it matched the rent growth from the beginning of 2019. Average asking rents across San Diego’s market-rate apartment landscape ended the first quarter near $2,430 per month. That’s up 0.6% in the past 12 months.
The luxury sector saw the strongest month-over-month rent growth in March at 0.7%, and it also outpaced mid-tier and workforce housing rent growth during the first quarter. Rents rose 1.3% in four- and five-star properties, legging out 0.9% growth in three-star buildings and 0.5% in one- and two-star properties.
Downtown and University Town Center were the only neighborhoods that saw rents fall in March, albeit marginally. Rents dipped 0.1% in UTC to $3,165 per month and 0.2% in Downtown to $3,005 per month, although rents were up in each area for the quarter by 0.4% and 0.2%, respectively.
Beach towns in the Central Coast and North Beach Cities neighborhoods led the region in rent growth in March. With renters poised to flock to the beach for the summer months, rents rose 1.7% and 1.3%, respectively, last month. That pushed both areas to the top of the region for rent gains in the first quarter. Rents were up 3.3% in the Central Coast beach towns to an average of $2,310 and 2.6% in the North Shore Cities to $3,460 per month.
Mission Valley also had a strong March, with landlords raising rents by 0.6%, dragging first-quarter rent growth into positive territory at 0.5%, to an average of $2,750. Few areas of the region encounter the supply-side pressure to vacancy or rent growth that Mission Valley does. More than 2,000 market-rate units are in the pipeline, and roughly1,000 are scheduled to open in 2024, followed by another 1,000 in 2025.
In South County, rents rose 0.9% in March in Chula Vista. The 1.9% first-quarter rent growth was the strongest behind the beach neighborhoods, bringing average rents to nearly $2,370 per month. That has come after more than 800 apartments opened at the end of 2023, bringing rent growth to a screeching halt during the fourth quarter when rents fell 1.4%.
Concessions also began easing in March, as many landlords anticipated. The number of properties offering free rent or other concessions fell to the lowest level since November.
There is cautious optimism that more renters will be hunting for apartments during the second quarter, which has typically enjoyed the strongest demand and rent growth. Property managers are hopeful that fewer concessions will be in play with the spring leasing season here which should result in higher effective rents.