San Diego’s multifamily market in Q3 2025 remained stable but challenged by affordability pressures. Vacancy held at 5.4%, steady quarter over quarter and below last year’s peak, supported by widespread concessions that tempered further increases. Downtown vacancy, which surged above 10% in 2024, has eased slightly as new deliveries leased up, though units are sitting vacant longer and lead conversions remain weak. Rent growth was just 0.2% year-over-year, well below the long-term 3.1% average and the national pace, with asking rents averaging $2,500 per unit. Despite modest rent gains, many operators continue offering incentives, even on renewals, to sustain occupancy, and rent growth is unlikely to materially accelerate before mid-2026. Concessions are expected to remain widespread well into next year, keeping rent growth modest through at least mid-2026, with a return to the long-term average pace not anticipated until 2027.

 

Key Findings

• Vacancy held steady at 5.4%, with rent growth muted at 0.2% year-over-year, significantly trailing the national average. Widespread use of concessions continues to suppress effective rent gains and is expected to persist into 2026.
• Institutional investors remain cautious due to soft rent growth and heavy reliance on concessions, though stable vacancy and sustained absorption signal underlying market resilience.
• Development momentum remained strong with 8,700 units under construction, 2,000 units delivered, and 1,100 units absorbed during the quarter. However, supply continues to slightly outpace demand, particularly in luxury segments with vacancy in Class A assets reaching 10.2%.

 

San Diego Multifamily Supply & Demand Dynamics

Source: CoStar Group, Inc.

 

 San Diego Demographics

Source: CoStar Group, Inc.

• Unemployment Rate: 4.3%
• Current Population: 3,316,914
• Households: 1,201,643
• Median Household Income: $110,223

 

San Diego’s economy is powered by a strong mix of military, innovation, and tourism. The defense sector anchors roughly 25% of local jobs, supported by major installations like Camp Pendleton and a growing Navy presence, while contractors such as Northrop Grumman, Qualcomm, and General Atomics fuel employment. Innovation thrives with over 80 research institutes and a robust life sciences and tech ecosystem, including Amazon, Meta, and Apple. Tourism adds another layer of strength, generating $22 billion in FY2024 from 32 million visitors drawn to the region’s coastline, attractions, and proximity to Baja and Los Angeles. Cross-border trade through the Otay Mesa Port of Entry and major infrastructure projects further bolster growth.

 

San Diego’s Base Sectors

Source: The City of San Diego

• Manufacturing
• International Trade
• Military
• Tourism

 

Population, Labor Force, & Income Growth

Source: CoStar Group, Inc.

 

San Diego Multifamily Construction

Construction activity remained elevated, with 8,700 units under construction, representing about 3.1% of existing inventory and aligning with the region’s five-year average. Developers continue to deliver a steady stream of new supply, with 2,000 units completed and 1,100 units absorbed during the quarter, while 5,300 units are scheduled to open by year-end following 5,000 completions last year, one of the highest totals in the past decade. Despite strong development momentum, regulatory hurdles, lengthy entitlement processes, and high construction costs, particularly for workforce housing, remain significant barriers. The pipeline also reflects a shift toward smaller unit types, limiting options for larger renter households and influencing future demand dynamics.

 

Units Construction Starts

Source: CoStar Group, Inc.

 

Units Under Construction

Source: CoStar Group, Inc.

 

San Diego Multifamily Sales

Investment activity in Q3 2025 remained muted amid persistent uncertainty and operational headwinds. Transaction volume totaled $188 million, with assets trading at an average of $184,000 per unit and cap rates rising to 5.7%, reflecting elevated vacancy and rent declines. Despite robust fundamentals on the demand side investors remained cautious due to ongoing regulatory challenges and soft rent performance. In early 2025, MG Properties completed one of San Diego’s largest single-property apartment transactions of the past decade with its $309 million acquisition of the 718-unit Park 12 from Greystar. Pricing adjustments and higher yields have drawn selective interest. However, many buyers continue to take a wait-and-see approach as the market works through supply pressures and a sizable construction pipeline.

 

San Diego Multifamily Sales Volume

Source: CoStar Group, Inc.

 

By the Numbers

Q3 2025 | Source: CoStar Group, Inc.

• Sales Volume: $568M
• Price Per Unit: $402K
• Cap Rate: 4.7%
• Vacancy Rate: 5.4%
• Rent Growth: 0.2%
• Asking Rent Per Unit: $2.5K
• Under Construction: 8.7K Units
• Delivered: 2K Units
• Absorbed: 1.1K Units