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San Diego apartment boom: More than 4,000new apartments and most are outside downtown

Phillip Molnar

March 03, 2022, 5:20 AM PT

San Diego is poised to have one of its biggest apartment construction years of the last decade with towers rising throughout the county.

There are roughly 4,600 apartments opening in 2022, said data from real estate tracker CoStar and developers, with most outside of downtown. More than a quarter of new apartments are in Chula Vista, a turnaround from the past few years where skyscraping residential towers downtown made up the majority of new supply.

It will mark a second year of new apartment deliveries topping the 4,000 mark, led by strong rent growth and changes in legislation that favor denser development.

While developers often talk of difficulty in getting projects approved, the payoff seems to be worth the headache: Average asking rent was $2,191 a month in mid-February, said CoStar, an increase of 14 percent in a year and its biggest jump in records going back to 2000.

“The San Diego market has never seen that type of rent growth — ever,” said Darcy Miramontes, a San Diego managing director at real estate firm JLL.

Rent also is on the rise across the United States, driven by wage growth and housing shortages, but Miramontes said San Diego has something going for it: Some of the biggest home price increases in the nation, motivating most workers to rent instead of own.

Most new developments are anticipated to have high rents, at or above the average. The countywide vacancy rate was hovering at record lows in February — 2.2 percent — with landlords in a strong position to raise rents. But it isn’t all bad news for renters. Most experts predict so many apartments flooding the market will increase competition and possibly slow rent gains.

Apartment construction seems to be spread out equally through much of San Diego, but South County is seeing its biggest surge in new units in recent memory.

Chula Vista’s masterplan community Otay Ranch alone has around 1,165 new apartments under construction. Otay Ranch also has the most for-sale homes of anywhere in the county this year, making it the center of residential development in San Diego County.

The biggest project this year will be in Otay Ranch, the Avalyn at Millenia, with 480 apartments under construction. Perhaps enticing renters to give South County a shot, developer Ryan Companies went all out with amenities: A speakeasy, music practice room, 2,400-square-foot pool and skydecks with views to the ocean.

Developers haven’t soured on downtown, which made up the bulk of new apartment construction coming out of the Great Recession. Instead, it just so happens that most of the big projects will not finish until 2023 and 2024. Examples include the 431- unit West tower (formerly called Courthouse Commons) on Union Street anticipating completion in 2024 and the 395-unit Simone tower in Little Italy opening in late 2023.

Rent growth across San Diego County means developers are game for anywhere they can get approved, as opposed to one area over the other, said Nathan Moeder, a San Diego housing analyst.

“Looking for land is the biggest obstacle,” he said. “They are just looking for wherever there is developable land. It’s making a lot more sense to put density in a suburban market — plus, the escalation of rental rates makes it more feasible.”

Moeder, a principal with London Moeder Advisors, said with the region building more apartments than for-sale housing home prices will continue to rise — making renting the only option for many people long term.

San Diego County’s population has continued to grow despite the Great Recession, rapid price acceleration in housing prices and the pandemic. Its population increased to nearly 3.3 million in 2020, from 3.1 million in 2010 — a 7 percent boost, said the U.S. Census Bureau.

The San Diego Association of Governments predicts the region will grow to 4.38 million people by 2050. It forecasts the biggest areas for population growth will be National City, Vista, city of San Diego, El Cajon and Chula Vista.

Avalyn at Millennia: The county’s biggest project

It feels like a new city is rising out of the ground in Otay Ranch.

On a recent Thursday, roughly 450 workers — electricians, surveyors, engineers, landscapers, marketing staff and foremen — all were rushing around at the 12-acre Avalyn site.

The 480-unit project will have eight buildings, about four to five stories. Each apartment will come with a parking place, which is hidden from street view in garages and lots in the interior of the site.

Daniel Bertao, director of real estate development at Ryan Companies, said the project is designed to have a suburban-urban feel — It looks a lot like a city street with wide center corridors, buildings (not driveways) up to the street and easy walkability to a nearby park under construction or the many amenities on site.

“It’s designed more to the person,” he said.

The first renters are set to move into the property later this month but Ryan Companies said it has yet to set prices, only to say they will be market rate. The nearby Boardwalk at Millenia building, which opened in summer 2018, is charging an average $2,321 a month for a one-bedroom; $3,031 for a two-bedroom and $3,573 for a three-bedroom.

Bertao says renters seem eager to move into South County. He also says he hears from people who moved out of Chula Vista and want to come back. Having said that: Avalyn went bonkers with amenities to sweeten the deal.

Avalyn has a 2,400-square-foot pool, 250-square-foot hot tub, balconies, full-size washer and dryers (many new apartment buildings have smaller models), gym, coworking space, pickleball area, electric vehicle charging stations, gardens and a park for pets.

One of the more unique amenities is a speakeasy in a lounge/library area hidden behind a bookshelf. The room also contains a music studio for bands or kids trying to learn a new instrument. The space — constructed of acoustic absorbing material —will allow musicians to play without disturbing residents. The studio is also far from any apartments.

Bertao said the extensive amenities are in response to competition from other apartment complexes opening.

Moeder, of London Moeder Advisors, said there is already a market for South County renters, and developers need to do very little persuading to get tenants into the area. The main motivation, he said, of adding so many amenities is to create a lot to do in suburban areas. The thinking is a new apartment building in North Park doesn’t need to worry so much about amenities because there is already a lot to do in the area, but a new apartment complex in the suburbs needs to be like a mini-city.

Apartment complexes with good amenities, Moeder says, also tend to reduce turnover, with renters more likely to renew leases year after year.

Avalyn is not the only Otay Ranch apartment community opening in 2022. There is also the 405-unit Enclave Heritage project and the Residences at Cota Vera with 280 apartments.

Renters in Otay Ranch with cars are best positioned to live in the new communities with quick access to the South Bay Expressway 125 toll road or Interstate 805. Unlike new apartments in East Village, La Mesa and Mission Valley, the Otay Ranch community is cut off from the San Diego Trolley.

It has access to the MTS Rapid Express bus system, which mixes with general traffic and can take considerably longer. For instance, the MTS Pronto phone application estimates a trip from western Otay Ranch to downtown, not during rush hour, would take more than one hour — compared to a 20 minute to 30-minute car ride.

Chula Vista has already seen some of the biggest population growth in the region. The U.S. Census said its population grew by 45,873 people from 2010 to 2020.

Townsend: Mission Valley’s latest

Mission Valley has seen considerable apartment construction over the last few years with the city prioritizing the area for growth because of its access to transit options and closeness to job centers.

The latest major project is the 277-unit Townsend project on North Camino Del Rio near the Fashion Valley mall.

Developer Dinerstein Companies said it has yet to set rents, but it also built an apartment complex next door, Metro Mission Valley, that is charging an average $2,974 a month.

Josh Vasbinder, a partner at Dinerstein, said Mission Valley is an ideal place for new apartment construction because it is centrally located, and close to the San Diego Trolley and jobs. He said the area has always been a good place to work and then go home, but it is becoming more alive in the evening.

“Workers can now play and live all in the same submarket,” he said.

Vasbinder said he predicted most renters would be young professionals who are looking to spend a little less on rent than in coastal areas or downtown, while still being close to work.

Townsend has 10 live/work units where the renter lives on the second floor and has their shop on the ground level. A similar project, Bluwater Crossing in Carlsbad, has live/work units and some renters told the San Diego Union-Tribune they were able to write off much of their rent as a business expense on taxes.

Townsend also has a lot of amenities: Co-working space, a gym, mailroom for getting packages, yoga studio, dog park, courtyard with fireplace and BBQ pits and three sky decks. Townsend is right next to the intersection of Interstate 8 and State Route 163 so while the view in some apartments might not be great, it has extra thick windows that block out loud noise inside the units.

The parking system could be considered an amenity if you don’t have a car. Parking at Townsend is what city planners call “unbundled” because renters have the option to pay a monthly fee for a parking spot, meaning a person without a car would have a smaller rent bill. Dinerstein also said it hadn’t set the price on parking yet.

Mission Valley has seen considerable rent growth in the last year, up to an average of around $2,927 a month, said CoStar data. The rent has increased roughly 19 percent in a year — faster than the countywide average.

Miramontes, of JLL, said Mission Valley works well if there is a couple who lives together and who work in different locations. She said it is one of the few places in San Diego that is close enough to the coast while also being near big job centers.

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