Smaller Units Dominate New Inventory
By Joshua Ohl
CoStar News
March 10, 2025 | 1:24 P.M.
Last year, roughly 4,800 market-rate apartment units were completed across the San Diego region, marking the third most units to open in a calendar year in the past decade. This year, developers are on track to complete 3,200 market-rate units.
The new properties that have opened are heavily tilted toward smaller units. Last year, nearly 50% of the units that opened were one-bedrooms, while studios comprised 14% of new inventory. Conversely, only 28% of new units in 2024 were two bedrooms, and under 10% comprised three- and four-bedroom units. That trend has largely held in place since 2017 and the reverse of the unit mix that was added between 2001 and 2014.
Local developers have pivoted toward smaller units due to their ability to add more units and higher rents on a per-square-foot basis, according to more than one local builder. For instance, the average asking rent for studios that opened in 2024 is $5.10 per square foot compared with $4.25 per square foot for the two-bedroom units that opened last year. There were roughly 1,000 more one-bedroom units built in 2024 compared with two bedrooms, and average asking rents are $.30 more per square foot.
But unlike the national trend, which saw a clear reduction in groundbreakings in 2024, when they fell 40% year over year, San Diego’s pipeline remains as consistent as ever.
Last year, builders broke ground on over 4,700 market-rate apartments, representing a 7% year-over-year decline compared with 2023. Yet it also marked the fourth-highest number of market-rate units to break ground in San Diego in the past 20 years.
Although some projects have been placed on hold due to higher construction and debt costs, there were still 9,000 market-rate units in the pipeline at the end of 2024. That was a hair higher than the five-year average for the pipeline.
The heaviest pockets for construction will sound familiar. The Mission Valley area leads the region, with 2,400 market-rate units in the pipeline. Nearly 1,800 units are under construction in the Balboa Park neighborhoods, and over 1,100 are being built in Chula Vista.
Downtown’s pipeline thinned notably by the end of last year, ending up with less than 900 under construction after 1,900 new market-rate units opened in 2024.
As developers continue to bring smaller units to market at a nearly two-to-one margin over units with multiple bedrooms, it could be more difficult for growing renter households to remain in the San Diego region because they have fewer larger units to choose from.
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