Apartment development still runs hot in San Diego

By Joshua Ohl

CoStar Analytics

August 13, 2025 | 8:43 AM

Unlike last year’s national trend, which saw U.S. apartment construction starts fall 40% year over year, construction of new apartments reached a peak in San Diego. Despite the higher costs of borrowing debt and construction labor and materials, more market-rate units broke ground in the market in 2024, a total of 6,100, than in any other year since 2001.

Concerns over the impact of tariffs on building materials and access to labor have, however, become a concern in the region this year.

Only around 1,300 apartment units broke ground in San Diego during the first half of the year, 900 fewer than the 10-year average for the first half of the year and the lowest first-half total since 2019.

At the midway point of 2025, more than 9,800 market-rate units were under construction across San Diego. The 10-year average has been 8,100.

Downtown San Diego had been the epicenter of apartment development activity since 2016, although as developable sites in the East Village have dwindled, so, too, has construction activity.

At the start of the third quarter of this year, fewer than 900 units were underway, the lowest level since 2015. The development pipeline emptied, compared with recent history, after 1,900 market-rate units opened in 2024, the most in the past 25 years.

While always a hotspot for development activity, Mission Valley’s share of the pipeline has surged in 2025, with more than 3,200 units under construction. That represents 11.8% of the area’s existing inventory, and the most market-rate units under construction in 20 years in Mission Valley.

The Balboa Park neighborhoods have also bolted up the list of development hotspots in San Diego. Almost 2,200 units are under construction, accounting for 6.6% of existing inventory, nearly the highest level in the past 20 years. Thousands of parcels there have been upzoned to accommodate redevelopment over the past several years.

Apartment construction market shifting to fewer bedrooms

Since 2021, almost 80% of the 3,200 market-rate units that have opened in the Balboa Park neighborhoods have been studios or one-bedroom homes, easily the highest share of those units in San Diego during that period. Local developers have pointed to higher per-square-foot rents as the primary factor for building smaller units. Rents for the newest studios and one-bedrooms average $5.05 per square foot and $4.90 per square foot, respectively, versus an average of $4.35 per square foot for two-bedroom units.

The higher price per square foot has been one of the primary reasons that developers have pivoted to building units with fewer bedrooms in recent years.

A full 60% of the total units built since 2020 have been one-bedrooms or studios, reversing the trend from the first 15 years of the century when only 40% of the units built were comprised of those units. Of the 2,600 units in San Diego that opened in 2025, only about 42% have been multiple-bedroom units.

After almost 5,200 market-rate units opened across the San Diego region in 2024, another 5,000 are scheduled to open in 2025. That would be the most new units to open over a two-year stretch in over two decades and should provide some measure of relief for a rental housing market that local stakeholders have suggested is seriously undersupplied.

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