The San Diego region is one of high rents, low vacancies, and low cap rates, so say two reports recently covered by the San Diego Daily Transcript. New data, comparing rent growth number year-over-year found that San Diego rents as of March 2017 had reached $1,748 an increase of nearly 8% from last year. This trend was not always consistent, says Thor Kamban Bieberman, Daily Transcript reporter, adding “{rents} have risen the majority of the time.

One of the biggest factors that affected these rental prices in the report seems to be availability. “Unlike past decades, when most new product offerings were traditional garden and/or three-story stacked apartments, a much larger percentage of the new units released today are high-density, low-to-high rise rental condominiums” Bieberman explains, “The number of townhome rentals also has increased.” The resulting scarcity has seen vacancy rates go through the roof according to the report, with most areas (excluding pockets in downtown San Diego) seeing between 1.39 and 3.09 percent depending upon the San Diego submarket. The report also cited the removal of single family rentals and renovations to older buildings as a factor that will keep rents higher and availability lower.

And the renters just keep on coming. Bieberman notes that experts continue to see the cost difference between renting and ownership as a huge factor that keeps people from taking the leap. “There is still such a disparity between the money needed for rent in San Diego County versus the estimated $3,000 per month required for a mortgage” he explains.

Another reported number that continues to show San Diego’s strength is through its capitalization rate. To find a properties capitalization rate, one must simply “[divide] a property’s net operating income by its purchasing price; the lower the number. The stronger the property” says the Daily Transcript staff writer who recently identified San Diego’s tiered cap rates in late 2016 from a recently released report. “The Class A cap rate for apartments was lower than the neighborhood centers last year with an infill rate range of just 3.75-4.25” explained the writer “Suburban Class B apartments checked in with a 4.75-5.25 cap rate.” Coupled with low vacancy rates, decently low cap rates in the reported range can mean a strong return on investment, offering the ability to pay off a property faster and increase returns for future investments.

What does the future hold? Despite new construction on the horizon, Bieberman admits that there isn’t much that will at least change demand for the time being. “Nearly 10,000 apartment units are under construction in 46 projects around the county” he concluded, “But even with this surge of planning and construction… it still may be impossible to meet the rental demand.”

Find Thor Kamban Bieberman’s article “Rents hit new highs; vacancies low” HERE

Find the Daily Transcript article “Cap rates remain low in 2nd half of 2016” HERE