SAN DIEGO—Strong demand for rental housing and tighter underwriting standards mean a condo boom in Downtown San Diego is not likely to happen soon, Marcus & Millichap‘s first VP/regional manager John Vorsheck tells GlobeSt.com. We spoke with Vorsheck exclusively following the release of the firm’s latest report on the San Diego apartment sector to get his perspective on the multifamily market Downtown.
GlobeSt.com: Where do you see potential growth for the Downtown San Diego apartment market?
Vorsheck: Performance dynamics remain strong, with vacancies at 5.9% despite greater-than-normal supply additions in the last year. Rent growth in Downtown San Diego has slowed recently to 2.4% since the rents in the area tend to exceed most other areas in the metro and can pressure prospective tenants’ budgets. Going forward, vacancies should tighten marginally, and rent growth should accelerate moderately.
GlobeSt.com: Is there potential for another condo boom Downtown?
Vorsheck: The last condo boom was a unique set of circumstances that was largely driven by the housing bubble and generally low underwriting standards that spurred accelerated home-buying activity. Given the strong demand for rental housing in San Diego and across the US, together with the generally tighter underwriting standards, a condo boom in Downtown San Diego is likely still a ways off.
GlobeSt.com: As the market gets built out, what nearby markets will benefit from the runoff?
Vorsheck: Prospective renters will continue to face lifestyle and affordability tradeoffs. Many favor a live/work/play urban lifestyle, and as a result, demand for Downtown San Diego remains strong. Naturally, though, not everyone can live in Downtown, so neighborhoods in proximity to Downtown that offer urban amenities will likely be favored.
GlobeSt.com: What else should our readers know about the Downtown San Diego apartment market?
Vorsheck: Downtown will continue to attract Millennials looking for a live/work/play urban lifestyle. Owners acquiring properties will be looking to upgrade existing interiors of units and overall amenities to meet the demands of the renting demographic. Strong demand will continue as Downtown continues to evolve.