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San Diego Real Estate Market
As a result of the growth in the regional economy and the ensuing rising demand for industrial, office, retail and housing there has been a marked growth in construction activity coupled with rapid absorption of space. The office market saw 3.2 million square feet of being absorbed during 1998 and saw a vacancy rate of 7.9%. The industrial market saw a vacancy level of 7% and a net absorption of 1 million square feet during the same period of time. The retail market experienced a vacancy level of 6.5% and a net absorption level of 2.5 million square feet.
Single Family Residential
San Diego continues to experience record prices for new and re-sold homes. The average price of a single family home reached the $323,000 level in 1999, up from $262,000 from in 1998, according to the San Diego Association of Realtors. Condominium construction, as a result of the negative impact of construction defect litigation, is almost non-existent. There are severe constraints on the supply of land suitable for residential construction.
Apartment Market
Job growth, population growth and the high barriers of entry for new apartment construction have continued to cause the San Diego apartment market to tighten. Average rents have grown to approximately $850 per month and vacancies are below 2%. Severe constraints of land supply and the high cost of permits have made apartment construction with the exception of Class A product not feasible. The cost of obtaining permits for new construction is approximately $20,000 per unit. Furthermore, hard construction costs attributable to the rising costs of construction materials and labor have increased to approximately $70 per square foot. As a result of these factors San Diego has consistently been ranked as one of the top markets to invest in multi-family properties in the United States. With the continued economic expansion that we are experiencing here, in San Diego and the lack of needed new construction rents and apartment values are poised to continue to increase for the foreseeable future.
Author: Allen Chitayat
