Developers Have Pivoted Toward Studios and One-Bedroom Apartments in San Diego’s Mission Valley
CoStar Market Insights: New Units Have Been Spared the Quarterly Losses Felt Throughout the Submarket
BY (via CoStar Group)
Millennium Mission Valley’s unit mix is nearly identical to this generation’s new inventory percentage.
Outside of downtown San Diego, Mission Valley has received the most interest from multifamily developers over the past several years. Firms such as the Dinerstein Cos. and Sudberry Properties have targeted the sprawling area, offering land that is zoned for high-density residential and which includes nine trolley stops, with more on the way.
Since 2015, builders have developed 2,500 new apartment units in the area, an eight percent increase to the total number of units in that area. Only downtown San Diego has added more units since 2015, with 3,600.
What’s a bit different about Mission Valley’s newest inventory is the unit mix. From 2000 to 2009, developers added a near-even split between one- and two-bedroom units — 2,190 and 2,345, respectively. Studios were notably absent from that generation’s communities.
But since 2010, developers have increasingly brought smaller units to market. Studios account for more than 10 percent of this generation’s stock, or more than 400 units. The ratio of one-bedroom units has also ticked up above 50 percent, while the number of two-bedroom units has fallen to less than 40 percent of new stock.
Mission Valley isn’t the only area to carve out a larger slice of studios over the past nine years. Only 400 studio apartments were built in the first decade of the century across all of San Diego. In 2018 alone, developers delivered twice that number in the county. With escalating construction costs and shifting renter preferences, developers are investing more in adding community-wide amenities rather than larger units.
In Mission Valley, average asking rents for new studio apartments are higher than one-bedroom units built before 2010. More than $30 stands between the two — $1,950 and $1,918 per month, respectively. On average, new one-bedroom units command $320 more per month than their predecessors.
An even wider rent spread separates two-bedroom counterparts. Those built since 2010 average $2,771 per month while last generation’s two-bedroom units ask for $2,383 per month.
It’s also noteworthy that rent growth per square foot in the fourth quarter of 2018 is virtually flat across all new apartment inventory in San Diego. That stands in stark contrast to last generation apartments. Quarterly rent growth for those units has fallen 5 percent per square foot. For comparison, Mission Valley is likely to end fourth quarter with the largest quarterly decrease in average rent this cycle, a full 1 percent.
