Transaction Volume Soared Past $5 Billion for the First Time in More Than 20 Years
By Joshua Ohl CoStar Analytics January 6, 2022 | 2:04 P.M.
As was the case in the San Diego industrial capital markets, multifamily investment volume soared to an all-time high in San Diego last year, with almost twice as much transaction volume recorded as the next highest year, with nearly $5.5 billion in deals, topping all of San Diego’s property sectors in 2021.
The final two quarters of 2021 each exceeded $1.6 billion in transactions, with the third quarter topping $2.3 billion. No other single quarter in the San Diego multifamily market over the past 20 years reached $1.5 billion in volume. That comes after local brokers have noted that there are more investors chasing apartment properties than are offered for sale.
The market sale price, which is based on the estimated price movement of every property in the market, rose more than 13% in 2021 to $400,000 per unit, while the market capitalization rate fell almost 10 basis points to 4%, which is one of the lowest rates in the United States.
Buyers received an average discount of roughly 2% off of asking prices last year. Mission Valley and East San Diego both topped $1 billion in trades last year. National investors are attracted to Mission Valley’s merchant builds and institutional properties, highlighted by the deal for the 2021-vintage Gravity, which sold to RedHill Realty Investors during the fourth quarter for $177.5 million.
Investment volume in east San Diego was driven by the sale of the Prebys portfolio in the third quarter that sold for nearly $1.5 billion. It has also been one of the primary targets by investors over the past several years who are interested in value-add plays. That was the case when the Parkway Club in El Cajon sold for $87 million in the fourth quarter to Utah-based equity fund Bridge Investment Group.
The neighborhoods along the north Interstate 15 corridor could have also topped that level. Three properties traded in Escondido at over $400 million during the fourth quarter. However, two of them were purchased by partnerships involving the California Municipal Finance Authority, while the third involved a Lyon Living portfolio that sold to a partnership involving the California Statewide Community Development Authority. Those buildings will be converted to middle-income affordable housing, removing them from the market-rate data set.
And much like 2020 ended with one of the largest foreign investment plays in the region in years, when Canada-based Brookfield Asset Management purchased Vantage Pointe in downtown San Diego for more than $300 million, 2021 ended with Brookfield purchasing the Merian for $240 million.
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