The Coastal Counties of Southern California (including San Diego County), continue to garner attention as on the fast track to a near-term market recovery in the housing market.
The word on the street today in the real estate industry (locally and on Wall Street) is that San Diego County is suffering from a supply shortage of new construction rental housing.
A robust supply of capital appears to be anxiously awaiting the opportunity to finance the development of new multi-family housing in “A” and “B” locations throughout the County. Given the perceived shortage of new construction rentals, nine multi-family projects totaling over 2,600 units are currently in the planning pipeline.
Vacancy rates among new rental townhouse properties that are built and designed with for-sale housing features in the County are close to 100% occupancy, likely due to the ownership of housing design and upgraded features (direct access to two-car enclosed garages etc.), attracting the many foreclosure and short sale “refugees,” or casualties from the “Great Recession.”
The majority of vacant multi-family properties are currently offered in the range of $50,000 to $100,000 per door, depending upon the strength of location.
SAN DIEGO S-CURVE: In the new construction for-sale housing sector, the “San Diego S-Curve Submarket” has dominated new home sales in the County for the last 12 months.
The S-Curve Submarket can be described geographically as: Beginning with the Carmel Valley (Pacific Highlands Ranch, Carmel Country Highlands etc.), moving east along Highway 56; and then north through the Torrey Highlands/Westview High School area along Camino Del Sur up to and including the Del Sur Ranch, and then east through the 4S Ranch and Camino Del Norte Road.
New home communities located within the S-Curve submarket attract many of the white collar executives and engineers who are employed in the biotech and high-tech firms such as Qualcomm, Sony, Hewlett Packard, etc. These consumers place a heavy premium on the stellar public schools serving this submarket. They also find access to this area convenient through Interstates 5 and 15, and Highway 56. The majority of subdivision land within this submarket accommodating new single family detached housing has been equivalent to values ranging between approximately $300,000 and $500,000 per finished lot, depending upon location and lot size.
North San Diego County: In North County large scale residential development remains to be developed in master plans within Del Sur Ranch, the West Robertson Ranch, and Pardee’s land holdings in the Pacific Highlands Ranch Area (east Carmel Valley). A number of sizeable land plays located within the North County perimeter submarkets (Bonsall, Escondido, Valley Center, Fallbrook, Pala Mesa, and the I-15 Corridor between Riverside and San Diego Counties) are awaiting a demand push for the relative large supply of lots and homes in the region.
East San Diego County: In East County, the Fanita Ranch in Santee has yet to be developed. A steady supply of small bite-sized infill land opportunities are emerging.
South San Diego County: The South Bay is the “800-pound gorilla in the room” because it has thousands of residential units remaining to be developed within existing and proposed master planned communities in the East Chula Vista area and Otay Mesa area. The Baldwins and extended family, McMillin Communities, and Home Fed are a few of the builders/developers with skin in the game. In addition, the area between East Chula Vista and the Mexican border (Otay Mesa, Brown Field etc.) has the potential for a large volume of new housing development within the next five years given the revised zoning currently being considered by local government.
With the pending housing market recovery, the development of a vibrant downtown San Diego housing market will be in reach again, once the dust settles concerning local government redevelopment.
Source: Bob McFarland, Marketing Consultant, (858) 568-7428