Apartment Rents Rise in San Diego, Boosting Prospects for the Spring
Rents Finally Reverse Course in University Town Center
By Joshua Ohl
CoStar Analytics
March 7, 2024 | 9:04 A.M.
It may be too early to say that San Diego's worst rent losses are in the rearview mirror, but February marked the second straight month of rent gains in the California city’s apartment market, overcoming a widespread downturn that rippled across the region in the second half of 2023.
Apartment rents grew 0.3% in February and are up 0.5% in 2024 through February. Although that's below the first-quarter pace between 2015 and 2019, when apartment rent growth averaged 1.4%, it’s a welcome respite for area landlords who saw rents drop 2.2% between July and December of 2023.
There may be some momentum heading into the spring leasing, a season that typically sees San Diego's best quarterly rent growth. Between 2015 and 2019, the metric averaged a healthy 1.8%.
Local property managers have mentioned that rent growth has lagged behind historical performance in recent months due to increased competition to secure new renter households. That environment of lighter demand inhibits aggressive rent raises.
Lease tradeouts, however, are still seeing declining effective rents due to the widespread concessions used in nearly one-third of properties surveyed by CoStar Research in February.
Once again, growth in the region’s naturally occurring affordable housing trailed other residential typologies, with rents rising 0.2% in February. The luxury sector, facing supply-side pressure and competing lease ups, saw rents rise 0.3%, while midtier properties saw asking monthly rents grow 0.4%.
At the neighborhood level, rents fluctuated. Perhaps most notably, University Town Center's average rents rose by 0.8% in February, ending an eight-month slide that saw rents tumble 7.7%. Rents rose 0.5% downtown during February, bringing the average asking rent to nearly $3,000 per month.
In Chula Vista, where more than 800 market-rate apartments opened at the end of 2023, rents were up 0.8% in February to an average of $2,350 per month. However, rents in neighborhoods along the Interstate 15 South Corridor surged 1.6% in February to an average of nearly $2,950.
Further north along that corridor in Escondido and San Marcos, rents were down 0.4% in February to an average of about $2,340 per month. In Mission Valley — which has one of its densest pipelines in the past five years with more than 2,000 market-rate units under construction — rents dropped 0.5%.
Although the region still has some rent-loss recovery to do, landlords are hopeful that the upcoming spring leasing season has shifted momentum. Managers expect that concessions will begin easing in the coming months, which should lead to effective rents rising once again.