Recent trends suggest a potential turnaround in San Diego's apartment rental market, which had been facing a downward trajectory. February continued the upward momentum seen in January, indicating a positive shift after a series of rent declines throughout the latter half of 2023.
In February alone, apartment rents in San Diego increased by 0.3%, contributing to a 0.5% rise in rents for the year to date. This growth is modest compared to the 1.4% average increase in rents observed in the first quarters from 2015 to 2019, but it marks a significant improvement for landlords who witnessed a 2.2% reduction in rents from July to December 2023.
As the spring leasing season approaches—a period traditionally associated with robust rent growth in San Diego—there is cautious optimism. Historical data from 2015 to 2019 shows an average rent increase of 1.8% during this season.
Despite the recent uptick, the pace of rent growth has been somewhat restrained compared to past years, largely due to the competitive landscape for attracting new tenants. This competition has prevented landlords from implementing significant rent hikes.
The impact of lease tradeouts remains evident, with ongoing rent reductions stemming from the extensive concessions offered in roughly one-third of properties analyzed by CoStar Research in February.
In terms of housing categories, the increase in rents varied in February. Naturally occurring affordable housing saw a modest 0.2% increase, while luxury apartments experienced a 0.3% rise, amid supply challenges and intense competition. Mid-tier properties outperformed, with a 0.4% increase in asking rents.
Zooming in on specific neighborhoods, University Town Center displayed a notable recovery with a 0.8% increase in rents, reversing a prolonged decline. Downtown San Diego also saw a 0.5% rise, pushing average rents close to $3,000 per month.
Chula Vista enjoyed a 0.8% rent increase, with the average rent reaching $2,350, buoyed by new market-rate apartments. Conversely, neighborhoods along the Interstate 15 South Corridor experienced varied trends, with a significant 1.6% increase in one area, while others like Escondido and San Marcos saw slight decreases.
Mission Valley, despite a considerable construction pipeline, faced a 0.5% dip in rents. With over 2,000 market-rate units in development, this area's future rent dynamics will be interesting to observe.
As San Diego's rental market progresses into the spring, the prevailing sentiment among landlords is one of cautious optimism. With expectations of reduced concessions, the hope is that the market will see a return to more robust rent growth, aligning with seasonal trends.