From the sddt.com:
Developers and construction officials are seeing signs of what could be the next trend in San Diego’s construction: multifamily housing.
The county of San Diego reported 541 multifamily permits were pulled in February, the most in any month since 633 were pulled in April 2008.
When one adds February’s number to January’s, 836 multifamily permits have been issued so far in 2011, the most in the first two months of the year since January 2006 when 987 permits were pulled.
Tammy Harpster, chief investment officer for Taag Investment Management, said there is a “feeding frenzy” going on with developers and investment companies for land to build multifamily housing projects.
She believes it’s because the demand for renters is increasing.
“A lot of people who lost their homes due to foreclosures or short sales, now want to rent and move back into the city,” Harpster said. “The core area is in between Interstates 5 and 805.”
Harpster said rents have been rising on the multifamily entitlements Taag Investment Management owns and in turn has raised the price of land for multifamily housing projects, saying land is going for about $1.50 to $1.75-per-square-foot.
“A lot of people who bought (single-family homes) in Santee or other areas outside of the city of San Diego and lost their home now want to relocate closer to where they work, even if they have to rent,” Harpster said. “Before people didn’t mind the long commute to work since they thought they were getting a great deal on their single-family home.”
One of the largest master planned developments in San Diego County is Civita in Mission Valley. The first phase of the 4,800 housing unit community calls for a 306-unit apartment complex and two townhome buildings totaling 200 units, but no permits have been pulled in the last two months for any of these housing units, according to Marco Sessa, senior vice president of Sudberry Properties. Sudberry is part owner and developer of Civita.
Dave Gilmore, principal at the architectural firm LPA Inc., said some developers are going off the trend of seeing vacancy rates on office space decrease.
“We have seen a lot of office space being leased up in the last month,” said Gilmore, whose company is based in San Diego’s East Village. “I think developers are seeing business expand and moving into California and believing more (multifamily) urban housing is needed, especially on the westside of San Diego.”
Gilmore could not point out a new multifamily development in the works in the county, but did say some of his clients are developing master- planned communities — with multifamily housing projects — such as the Irvine Co. in Orange County.
Jeff Bingham, chief executive officer of Bingham Construction, said he has noticed land in Mira Mesa and in Escondido being leveled off for the construction of multifamily housing projects.
“There is a wave of apartment complexes coming, because people now can’t afford those large (single-family) homes and are now downsizing,” said Bingham, who added his company has completed a few renovation projects to existing apartment complexes.
Great to see new construction/jobs of any kind. I hope they are in great locations to justify the needed rents. My take is that these apartments will fill up, but be quite expensive to rent to justify the cost of new construction.
While costs are down, they are not down that much on a new commercial build. 200 units isn’t something you can do on the cheap like a ‘do it yourself’ flipper.
If one is so inclined to purchase apartments (low yield and low upside, but a semi-sleep at night capital preservation play) purchase the best located B/C bldgs possible (5-30 units to avoid competing with the larger players).
There will always be people seeking the ‘low-cost’ housing alternative in every area. Be able to rent below market and make your expected yield.
Clearfund (what does that mean anyways?):
How many apartments do you own? You know, doors?
Thanks – Mike
Or… Banks could foreclose on all the condos downtown and sell them at market value completely eliminating the need to create multi family rentals.
Q4 2010 was a really nice quarter for commercial real estate in San Diego. Vacancy rates have been improving since Q1 2010 and sales volume really improved in Q4 2010 (close to 2007 levels).
Unfortunately so far Q1 2011 has been really weak although the data isn’t complete yet. Sale Price SF and sales volume so far are back towards the poor levels of 2009. One quarter doesn’t make a trend though so hopefully it’s just a bit of a hangover from the rush in Q4 2010.
livinincali- I work up in Scripps Ranch and the first quarter saw several large office buildings vacant or with new lease signs going up.
Mitchell Intl and a science R&D company 9cant remeber).
Some of the other buildings have been over a year. I am certain some of them are moving elsewhere in the county or shutting down.
Mike – I formerly oversaw development of new luxury apartment projects across the country for a REIT. We did 500+ unit luxury complexes. Probably developed over 8,000 doors, coast-to-coast.
However, as an owner/investor we own ZERO apartments as the yields are too low for our client’s capital. Buying a 6% stabilized/current cap rate with minimal upside (as a general rule) doesn’t fit our model.
More focused on low mgmt/maintenance industrial/business park type deals and lending (love the senior secured lending).
Hat tip to sfginc for sending this link to apartment stories in U-T article:
http://www.signonsandiego.com/news/2011/mar/31/san-diego-county-rents-rise/
Vantage Pointe is renting 1br units for $1,700 per month, and are half full.
Demand and supply, sounds like win win. There are too many big expensive houses and ironically this drives up rents for poorer people who have to fight over the lack of cheaper units.
There were way too many McMansions and high end homes built in SD, Mira Mesa included.
Vantage point is also offering 2 months free rent.
12x$1700=$20400
Take out 2 months rent 2x$1700=$3400
$20400-$3400=$17000
$17000/12=$1417 (per month adjusted for the 2 months free rent)
Considering that parking + ammenities are included this might be a good deal for a renter that wants to live downtown.
I guess it’s nice to see people getting something they can actually afford.
Looks like a lot more business for the ice cream trucks.
If I was looking at living in a high-density urban location, I’d want to rent rather than buy. I know too many people with bad condo experiences to put skin into a home where I had to depend on other people to do their share to keep the roof from leaking.
GeneK-The rent vs. own calculation is very favorable towards renting in most, if not all, high-demand locations nationwide. Most urban areas are high-demand locations (of course, excluding places like Detroit). So renting is a good idea mainly because the area is in high demand as opposed to because it’s urban.