Yardi Matrix: San Diego Catches Silicon Valley Fever
- Jul 21, 2016
With broad-based job gains and above-average population growth, San Diego continues to produce a healthy climate for multifamily. The metro’s occupancy rate is a phenomenal 97 percent, on par with Los Angeles and among the highest in the country, while demand is strong and rents are growing at above-trend levels.
The combination of a deep pool of talent, venture capital and quality office/lab space is drawing a large number of tech and biotech companies to the area, turning San Diego into an alternative to Silicon Valley. Indeed, the metro is developing a reputation as the biotech capital of the West. Other segments that are driving growth include defense/military, manufacturing, international trade, hospitality, healthcare, and research and education. The versatility created by this mix helped San Diego during the financial crisis and can act as a potential safety net for investors during a future downturn.
Multifamily fundamentals are healthy on all fronts, and rents grew 6.9 percent year-over-year through May. The development pipeline, investment volume, home prices and rents are all at or near their highest point in the current cycle. Investor appetite is strong, with a record transaction volume of $1.5 billion. Though demand for units will remain solid, there are 32,000 units in the pipeline, which will help slow rent growth to a more sustainable 5.5 percent in 2016.