San Diego property managers and landlords just have to love it. Most rental surveys show that rents in San Diego increased 3-6% over the last year. A lot of that has to do with 41,000 new local jobs that in many cases were well paying positions in biotech, engineering and professional services. Partly this was due to a pace of new building that has reportedly been running at about half the level necessary to accommodate increased population.
As enjoyable for property owners as this trend is, its sustainability can be questioned. In contrast to rents, general inflation in San Diego was only about 1.3% during the last half of 2014. Even more significant, average wage growth for the last year was approximately 2% – as little as half to a third the rental increase.
When rents go up beyond the ability of tenants to pay, occupancy goes down. Essentially more people doubling up like we see during recessions. According to one of the most reputable local sources, the San Diego occupancy rate has dropped to 95.9% from 97.3% last year. Still above the traditional average of 95%, but the trend is troublesome.
An intelligent strategy may be to raise rents now, and in the not too likely event average rents decline severely – consider reversing the rent increases of this time to keep good tenants. I don’t think anyone has ever resented a landlord for lowering rent.
In the meantime, enjoy the additional revenue and always feel welcome to call me directly at (619) 786-3351 if you want to chat.
Best Regards,
Mark Di Tommaso
Owner/Broker
8 West Property Management
