The San Diego Multifamily market is demonstrating resilience amidst increased supply.

Despite a surge in new multifamily development, San Diego's rental market remained remarkably stable in 2024. The year saw the highest number of new units delivered since 2018, yet the overall vacancy rate experienced only a marginal 50 basis points increase over the past five years. This resilience highlights the region's robust renter demand, which has effectively absorbed the increased supply, a stark contrast to many other major markets.

Asking rents in San Diego climbed by 1.9% in 2024, and a similar growth trajectory is anticipated for 2025. Notably, the Downtown submarket, previously grappling with higher vacancy rates, saw significant improvement. Downtown's vacancy rate decreased by 60 basis points to 7.6% in 2024, accompanied by rising rents, signaling a positive shift in market dynamics.

The investment sales market also witnessed a resurgence in the latter half of 2024, compensating for a slower start to the year. Transaction volume picked up significantly, aligning with historical averages. This increased activity, particularly involving Class A and newer Class B properties, drove median per-unit prices to $361,500, a substantial 36% increase from 2023. Newly constructed properties, built within the past decade, commanded even higher prices, with some units surpassing $500,000.

Outlook for 2025: Continued Stability and Growth
The San Diego multifamily market is projected to maintain its steady performance in 2025. While new unit completions are expected to exceed long-term averages, potentially exerting slight upward pressure on vacancy rates, the region's consistently strong renter demand should mitigate any significant impact. Historical data underscores this stability; quarterly vacancy rates have averaged just 4% over the past five years, and haven't exceeded 5% in over 15 years. This trend is expected to continue.

The investment market is poised for further growth, fueled by San Diego's healthy fundamentals and consistent rent increases. Class B and Class C properties, which have historically dominated transaction volume, are expected to experience the strongest rent gains and lowest vacancies in 2025. The strong performance of core multifamily assets continues to attract investment capital, with Class A and Class B properties accounting for a significant portion of recent transactions.

In summary, San Diego's multifamily market demonstrates a unique blend of robust demand and controlled supply, fostering a stable environment for both renters and investors.