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Investors Still High On San Diego Multifamily, Have Been For Years

In the San Diego apartment market, vacancies are low, rents are still edging upward and investors are definitely interested. How long that might last will be a question up for debate at Bisnow's State of San Diego Multifamily event Nov. 15.

Barham Villas, San Marcos

Countywide multifamily vacancy dropped to just 3.72% in September, down from 4.08% six months ago, according to Cushman & Wakefield’s Q3 2018 report on the San Diego multifamily market.

At the same time, the countywide multifamily average rental rate in Q3 was $1,960 per month, 5.7% higher than a year ago and 12.4% higher than two years ago. The average rent for units built since 2000 was $2,359, compared to $1,787 for units built before 2000, the report says.

These are the kinds of fundamentals that make investors take notice. Investment sales volume for local apartment properties for $5M and greater surpassed the $1B mark by the end of Q3 2018, according to Cushman & Wakefield.  

"For the last three consecutive years, total transaction activity has remained above the 16-year long-term annual average of $1.6B," Cushman & Wakefield Research Director in San Diego Jolanta Campion said. "While it would require a robust fourth quarter to reach that mark here in 2018, it's still possible.”

"I'm optimistic about San Diego apartment fundamentals in the medium term," MG Properties Group Chief Investment Officer Paul Kaseburg said. "Our economy is well-diversified and seeing healthy growth.  

"As with many of our markets today, I expect some divergence between the performance of Class-A properties in submarkets exposed to new supply and more affordable Class-B properties in suburban locations."

Holland Partner Group's Brent Schertzer, Pathfinder Partners' Lorne Polger, MG Properties' Paul Kaseburg and Murfrey Construction's Russ Murfrey at a Bisnow event

MG Properties is a San Diego-based owner and operator of apartments, with a portfolio of over 60 properties throughout the western U.S. The company recently sold Barham Villas, a 168-unit complex in San Marcos, for an unspecified price.

The property, at 570 Barham Drive, is on nearly 10 acres and dates from 1988. The two-story, low-density garden-style community features Mediterranean architecture with pitched-tile roofs and garages. 

The buyer, Virtú Investments, considers the property a value-add play.

“Barham Villas is a fit for the Virtú Evergreen Fund, our open-ended multifamily fund," Virtú Director of Acquisitions Evan Faulkner said. "The acquisition provides allocation in a San Marcos location within San Diego in a property that will benefit from community improvements.” 

Kevin Mulhern and Rachel Parsons of the CBRE Multifamily team represented the seller, while Virtu Investments represented itself. 

Kaseburg will be one of the speakers at Bisnow's State of San Diego Multifamily event Nov. 15 at the Westin San Diego Gaslamp Quarter.