Parsons: “There are numerous buyers for every transaction; the challenge is finding sellers.”
SAN DIEGO—Significant pent-up demand for apartments in San Diego, which only transacts on average 18 trades a year over 100 units, is creating a market where cap rates are among the lowest in the nation, CBRE VP investment properties, multifamily, Rachel Parsons tells GlobeSt.com. A recent report from the firm showed that, among stabilized class-A infill multifamily assets, Los Angeles and San Diego were among the markets with the lowest cap rates in the nation at 4%.
The report also revealed that California leads the country with the lowest suburban cap rates for multifamily. A shortage of multifamily housing, a growing economy and a large renter population are all contributing to strong multifamily supply/demand fundamentals. These strong economic and demographic factors are fueling investor sentiment, which has driven cap rates to record lows.
We spoke with Parsons about the San Diego infill multifamily cap-rate scenario and why they're so low in this market.
GlobeSt.com: What is causing multifamily cap rates for infill San Diego markets to be so low?
Parsons: It's the significant pent-up demand for San Diego multifamily. Our market only transacts on average 18 trades a year over 100 units. There are numerous buyers for every transaction; the challenge is finding sellers.
GlobeSt.com: Do you see this trend continuing in the near term?
Parsons: Yes. The demand for infill San Diego multifamily remains strong and will continue to attract aggressive capital. San Diego will always have some of the lowest cap rates in the country due to its sound fundamentals and stability factor.
GlobeSt.com: What else should our readers know about San Diego's infill multifamily cap rates?
Parsons: We are not projecting any major increases in cap rates this year, pursuant to unforeseen market conditions. Presuming interest rates rise, we may see increases in cap rates in the 0-to-25-basis-point range, but no one can predict the future.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
