Apartment vacancies decline, returning condo conversions absorbed

By THOR KAMBAN BIBERMAN, The Daily Transcript

Monday, December 3, 2007

The countywide apartment vacancy rate has declined from 5.1 percent in the spring to 3.4 percent in the fall, but the wildfires don't appear to have had much of an affect on occupancy.

According to the San Diego County Apartment Association's fall survey, homeowners displaced by the fires represented only a fraction of 1 percent of the new rental occupants.

The market was impacted much more by condominium conversions returning to the rental pool, but the SDCAA says these units have been absorbed nicely.

The overall vacancy rate translates to nearly 16,000 unoccupied units countywide.

"We anticipated a decrease in vacancies from what was reported last spring as returning condominium conversions began to be absorbed by the market," said Robert Pinnegar, SDCAA executive director.

Not all has been good news, however.

"Foreclosed homeowners returning as renters have probably further driven the decrease in vacancies.

Overall, the transitional nature of the for-sale housing market is what has most influenced a similarly transitional effect on the rental housing industry," the report stated.

The average apartment vacancy in the city of San Diego has ranged from a low of 1.4 percent in the fall of 2000 to a high of 5.4 percent this past spring.

Given that a 5 percent level is considered to be a market in rough balance, the level was not considered to be a problem.

The city's apartment vacancy rate stood at 3.5 percent as of the time of the fall 2007 survey.

The city's vacancy rates ranged from a low of 0.3 percent in Linda Vista, where 637 units were surveyed, to a high of 10 percent in Logan Heights. Only 40 units were surveyed there, however.

In the county of San Diego, while the vacancy rate was only 0.4 percent in Bonita where 253 units were surveyed, it was 5.4 percent in Alpine where 456 units were counted.

Countywide, properties less than six years old reported more vacancies than older properties, with studio units reporting the highest vacancies.

This is the same trend as what was reported in the spring survey.

Three-plus bedroom units less than 25 years old are the second unit type to report the highest vacancies countywide.

The greatest demand is for one-bedroom units regardless of the age of the property.

Across all unit types, the vacancy rate tended to be marginally higher in the city of San Diego than other regions in the county.

The SDCAA's Apartment Availability Index Survey, a supplemental survey that collects information on both vacant units as well as those on notice to vacate, also reported an 8.6 percent availability rate.

"Since the Availability Index measures the total number of units available and pulls from a select sample of full-time rental property owners and managers operating the largest number of units in the county, the results act as an early indicator of industry trends and provide a 'big picture' view of the overall availability of local rental housing," the report stated.

As vacancy rates have decreased, rental rates have increased to levels reflective of rising operational costs.

The average weighted rent for all unit types countywide rose 2.3 percent to $1,168 since the association's spring survey.

The rental rate ranges are enormous depending on location, number of bedrooms and the age of the units. While it is possible to pay just $586 per month for a one-bedroom unit in Encanto, it is also possible to pay $2,660 per month for a three-bedroom unit in Mission Valley.

Linda Morris, president of Cambridge Management Group, Inc. and this year's SDCAA board president, said the reported increase in rents are similar to what she's experienced at the properties her company manages.

"The costs to maintain and manage rental housing keep rising, which has ultimately affected rents," Morris said.

This year, the SDCAA tracked 14 different cities and utility service providers in the county that either approved or are considering rate increases, many of which are spread out over several years.

For example, in San Diego alone, water and sewer rates combined will increase about 15 percent each year through 2010.

The passage of additional property-related taxes, assessments, and fees also contribute to the rising costs.

According to San Diego County's response to the SDCAA 2007 Multifamily Fee Survey, there are a total of 468,067 rental units in the county.

The San Diego County Apartment Association's (SDCAA) fall 2007 Vacancy and Rental Rate Survey was mailed to more than 6,000 rental property owners and managers throughout San Diego County, and represents responses from managers of nearly 40,000 units.

MarketPointe Realty Advisors also has a survey (this one representing 113,761 units) that is conducted every September.

That report surveys complexes with 25 or more units. MarketPointe arrived at a 2.58 percent vacancy and a $1,291 average rent in that study.

 source =   http://www.sddt.com/