IMPERIAL BEACH, CA—The Imperial Beach submarket of San Diego has seen investor interest in multifamily surge as buyers hunt for few and far between coastal, value-add opportunities, Christopher Zorbas, senior director of Institutional Property Advisors, a division of Marcus & Millichap, tells GlobeSt.com. As we recently reported, M&M has arranged the sale of the Imperial Village Portfolio, three contiguous apartment communities totaling 87 units here; the $14.5 million sales price equates to more than $166,000 per unit. We spoke exclusively with Zorbas about the Imperial Beach multifamily market and why it is attracting investors.
GlobeSt.com: What makes the Imperial Beach submarket so popular for apartment investors?
Zorbas: IB has seen investor interest in multifamily surge as investors hunt for few and far between coastal, value-add opportunities. Because of its direct proximity to the Pacific Ocean and stable tenant base, interest in the IB market remains strong as rents continue to grow and vacancy rates hover near historical lows. The submarket for the most part is composed of smaller assets, so when anything of size comes to market, there typically is considerable interest. IB has many similarities to Oceanside when looking at demographics and the key drivers in the marketplace. Both markets feed off of tourism and have oceanfront, walkable retail corridors with new hospitality development that is centered around their respective piers. Like Oceanside, IB has a considerable military presence that contributes to a strong tenant base. The perception amongst many investors is that IB, like Oceanside, is one of the last affordable, coastal markets in Southern California.
GlobeSt.com: What is the development market for apartments like in this submarket?
Zorbas: There is very little new multifamily development in IB, which has a high barrier to entry since development sites are limited. As of late, much of the development has been focused on hospitality and the revitalization of its retail corridors. Much of the multifamily composition of IB consists of assets that are 20 units or less. Although demand for rental product is strong currently in IB, it is a tough market for developers who are looking for scale. Most of the new residential development has been focused on small scale, for-sale projects with a couple of small for-rent developments mixed in.
GlobeSt.com: Please describe the demographic of the typical apartment renter in this market.
Zorbas: The largest age cohort of the population within IB is 25 to 34. This age cohort is expected to grow by 16%, according to 2019 census projections. Millennials are attracted to IB because of the active, beach lifestyle and close proximity to Downtown and other major employment hubs in San Diego. IB also has a large military presence since it houses the Naval Outlying Field and is adjacent to Naval Base Coronado and Naval Base San Diego, National City.
GlobeSt.com: What else should our readers know about the Imperial Beach market?
Zorbas: IB is also situated in close proximity to the world-famous Hotel Del Coronado and for 31 years has hosted the US Open Sandcastle Competition, which draws 325,000 people annually for the competition alone. Imperial Beach has undergone a significant makeover in the last 10 years to become more visitor-friendly and commercially viable. In 2004, the City of Imperial Beach began implementing a community-redevelopment plan to improve the two main commercial corridors in IB, which are along Palm Avenue and Seacoast Drive. The city also benefits from its close proximity to one of the busiest border crossings in the world at Tijuana.