Q2 2025 San Diego Multifamily Market Report
Highlights
- San Diego’s apartment market is in a unique spot—while demand has surged since mid-2024, the past three quarters have seen the strongest net absorption since 2021. 796 units were absorbed in Q2 2025.
- Economic strain among renter households remains a key theme in San Diego, with property managers anticipating tough quarters ahead. Without a meaningful shift in demand, rent growth is unlikely to rebound to historical norms in 2025.
- Supply is expected to exceed demand in 2025, likely pushing vacancy rates above the long-term average.
San Diego Demographics
- Unemployment Rate: 4.6%
- Household: 1,199,868
- Current Population: 3,312,846
- Median Household Income: $109,404
Market Performance
San Diego’s apartment market continued to exhibit strong demand in Q2 2025, marking the third consecutive quarter of robust net absorption—levels not seen since 2021. This leasing momentum helped keep the overall vacancy rate flat at 5.4%, even as new inventory was added, including 1,900 units delivered year-to-date. However, this strong demand is largely incentive-driven, with approximately 30% of properties offering concessions to fill units.
Despite solid absorption, rent growth remained muted, with 12-month asking rents up just 0.3%, well below historical norms. Rent pressures were particularly evident in luxury properties, which posted a vacancy rate of 9.1%, reflecting ongoing affordability challenges and elevated competition. Meanwhile, rents declined year-over-year in several core submarkets, including Downtown, UTC, and Balboa Park. As developers push forward with additional deliveries—3,900 units expected by year-end—the market continues to face headwinds in achieving pricing power, even in the face of elevated leasing activity.
By the Numbers
- Sales Volume: $637M
- Cap Rate: 4.7%
- Market Sale Price Per Unit: $401K
- Vacancy Rate: 5.4%
- Rent Growth: 0.3%
- Market Asking Rent Per Unit: $2,528
- Units Under Construction: 9.974
- Units Delivered: 866
- Units Absorbed: 796 | Q2 2025 | Source: CoStar Group, Inc.
Effective Rent
Source: RealPage
Under Construction
Source: CoStar Group, Inc.
Construction across San Diego remained active in Q2 2025, with 10,000 units (3.5% of inventory) under construction and 3,900 market-rate units set to deliver by year-end. While this aligns with historical averages, it still falls short of the 15,000 units/year needed to address long-term housing shortages. Developers face steep hurdles—including lengthy entitlements, high soft costs, and strong opposition to density—which often delay or derail projects. New supply continues to skew toward smaller units, deepening challenges for growing renter households.
Sales
Q2 2025 marked continued momentum in San Diego’s multifamily investment market, signaling recovery from early 2024’s cyclical low, when only 40 market-rate properties traded—well below the pre-pandemic average of 140. Over the past 12 months, $3.2 billion in assets changed hands, exceeding the decade average of $2.9 billion. Investor sentiment has improved following the failure of a proposed rent control ballot measure in late 2024, though challenges like tenant protections and permitting complexity still weigh on value-add strategies. Cap rates generally range between 4.25% and 5.5%, with higher-end coastal properties on the low end. Notable transactions included Nuveen and Pacific Housing’s Q1 2025 acquisition of Teresina Apartments in Chula Vista for $183 million at a 5% cap rate. Buyers continue to be drawn by San Diego’s life sciences growth, strong tech presence, and stable fundamentals, with expectations of stronger rent growth through 2027 supporting optimism in the second half of the year.
Sales Volume & Market Sale Price Per Unit
Source: CoStar Group, Inc.
Submarket Highlights
Source: CoStar Group, Inc.
| Market Asking Rent Per Unit | Market Asking Rent Growth | Vacancy Rate | |
| North County | $2,542 | 1.0% | 4.4% |
| Chula Vista | $2,457 | 0.4% | 6.5% |
| Downtown | $3,135 | -0.8% | 10.8% |
| La Jolla/UTC | $3,213 | -2.8% | 4.4% |
| North Shore Cities | $3,569 | -1.0% | 3.7% |
