Marcus & Millichap, a commercial real estate firm that has ranked 42 metro areas in a report, is predicting San Diego to have the second strongest apartment market in the nation this year. This rating is fueled by job growth and short supply of rental housing. Factors affecting this rating include new construction, housing affordability, vacancy rates and rent hikes. San Diego was second only to Riverside/San Bernardino County and Southern California is predicted to hold four of the top five spots ( Orange County, Las Vegas, Los Angeles, Washington, D.C. sequentially).
San Bernardino County is expected to see a 6 percent rent hike in the coming year, because of job growth and lack of new housing, but San Diego County should only see up to 3 percent. This may be due to the recent hikes in home purchases, moving renters into homeownership. Condo conversions, which are increasingly popular locally, are contributing to home ownership from previous renters. This is a concern for landlords who don’t want to push their rental business out, for fear that at such hikes, renters will turn into buyers. But because of the market, this process is occurring naturally.
San Diego and Miami are the only two metro areas in the survey where apartment supply is actually shrinking. This is due to the rate of condo-conversions surpassing the level of apartment construction. It is expected that many of these condo-conversions will once again flip back into rentals, but from independent owners.
