Approximately 1,500 apartment units are projected to hit the San Diego market this year -- more than triple last year’s figure -- and many more are in the pipeline, according to Novato, Ca.-based RealFacts.
Prescott, Ariz.-based Land Advisors said nine apartment projects totaling more than 2,600 units are in the pipeline in the county, and that investors are ready to bankroll the developments.
“A robust supply of capital appears to be anxiously awaiting the opportunity to finance the development of new multi-family housing in “A” and “B” locations throughout the county,” Land Advisors wrote.
RealFacts reported there were 5,370 total residential permits pulled across the San Diego Metropolitan Statistical Area in 2011, with nearly 60 percent of those permits for multifamily units.
“A number of these projects will be developed in the downtown area which offers the walkability and access to transportation that is coveted by the next generation of renters,” RealFacts stated. “Specifically, Little Italy and the East Village will see a large percentage of new units as developers look to take advantage of each area’s unique characteristics. In Little Italy, larger luxury units, with high-end amenities and premium views will allow developers to demand market leading rents, while in the East Village, less luxurious units will provide a more affordable alternative.”
While the proposed Fat City Lofts project adjacent to Solar Turbines has morphed into a hotel development, numerous others are in the works in Little Italy.
One currently under construction is Broadstone Little Italy, a 201-unit apartment project with ground floor retail by Alliance Realty Partners at Grape and California streets. That project is slated for completion in December of this year.
Most of the other apartment projects in the works downtown aren’t expected to come on line until after 2012.
The East Village has several apartment projects in the works, including the 108-unit project at 13th, Park and C streets.
Developer Downtown Park Willmark Communities requested and received a time extension on its development agreement last November that now is valid until 2014.
Given financing realities, the 654-unit 11th and Broadway project by Pinnacle International Inc. is expected to be built as apartments.
That project was still under review, according to CCDC’s website.
A set start and completion date by Bridge Housing to transform the block at Ninth and Broadway into 250 affordable units, also wasn’t immediately clear.
RealFacts said downtown will likely continue to be an attractive area for investors and developers, given that Generation Y -- individuals entering their peak renting age -- represents the largest age group in the county.
RealFacts said these individuals -- many of whom are still in their 20s -- are typically drawn to denser, walkable areas surrounded to restaurants, bars, cafés and shopping.
“This coupled with ample sources of low-interest financing, limited supply and a rent vs. own comparison that favors renters, will allow San Diego to maintain its position as one of the hottest multifamily investment markets in the country,” RealFacts continued.
Not all the new apartment construction is taking place or being planned in downtown San Diego.
The 1,800-unit Casa Mira View complex now under construction by Garden Communities of California at Mira Mesa Boulevard and Interstate 15. These units will be made available next year.
A bit further south, Marietta, Ga.-based Woods Partners is expected to complete construction on a 379-unit luxury apartment complex within the San Diego Spectrum masterplan in Kearny Mesa later this year.
Woods Partners paid $21.5 million for the 5.93-acres site in August 2010.
The RealFacts report found that San Diego County ranks sixth in the state in terms of asking rents during the first quarter and third in Southern California, behind Los Angeles and Oxnard.
RealFacts found the average asking rent increased by 1.4 percent from the first quarter of 2011 to the like quarter this year to reach an average of $1,406.
While the average occupancy declined slightly from 95 to 94.7 percent, RealFacts said there is little reason for concern on that score.
Still, the research firm said there might be temporary increases due to a relatively large volume of apartments coming online within the next few years.
Land Advisors countered the biggest challenge may be how to build apartment complexes quickly enough.