SAN DIEGO–San Diego County apartment construction, driven by an explosion in demand for high-end dwellings, is now at its highest level in a decade, according to Reis Inc., a commercial real estate research firm.

Developers delivered more than 3,000 apartment units last year and are on pace to add 3,400 more this year. But even with the new supply, the market remains tight with an average 2.1%vacancy factor reported in the second quarter of 2000–virtually unchanged from a year ago.

At worst, vacancies are expected to edge no higher than 2.6% despite the blazing construction cycle. Rents continue to post robust rates of growth, with last year’s 9.2% increase in average asking rents to be followed this year by another 8.3% rise. Average monthly asking rents were $889 in the second quarter, spiking up to $1,026 in such hot high-tech-employee rich areas as Mira Mesa.

High single-family home prices, rising at a nearly a 17% clip from a year ago, continue to contribute to drive up rental rates.

Much of the construction to date has been occurring in Mission Valley, with H.G. Fenton Cos.-—developer of the Ikea and Costco-based Fenton.

Fenton’s master-planned community in Tierrasanta is expected to add up to 3,000 apartment units in the coming years, half of which are already under construction.

Investment activity is also hot in Downtown San Diego and the North County city of Oceanside.

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