Demand and occupancy rates remain at highest levels on recorded record, and will likely persist through 2022.
The region has seen historically high demand and rent growth in the past year, sending the vacancy rate in the San Diego multifamily market to the lowest level on record, just north of 2% in nearly 270,000 market-rate apartment units.
The level of absorption, which measures the change in occupancy over time, will likely fall in 2022. That’s not because of a softening of demand for apartments; it is an indication that San Diego could be nearing full capacity.
The new units that delivered in 2021 were quickly snatched up by renters at a rate that doubled the lease up average over the past several years for new inventory.
But the current pipeline will do little to mitigate San Diego’s housing shortage. The region could be serially undersupplied for the foreseeable future, and the pipeline enters 2022 with roughly 1,000 units less than the typical quarter over the past five years.
But there may be an opportunity for some landlords to help alleviate the stress on the housing market and the retail market. Big-box retail and anchor closures are littered across the region, and owners could up-zone some of these vacant sites to accommodate multifamily housing, which would ease pressure on the retail vacancy rate while providing another avenue for apartment development.