San Diego multi-family fundamentals have been steadily trending up over the last several quarters and are poised to continue their growth with recent development and increasing rents. Cap rates have held steady as vacancies have lowered and the number of projects coming on line have brightened the outlook, per commercial real etate research firm Costar Group. Commercial real estate appears to have hit its nadir, with banks beginning to return to CRE lending. According to Costar Group, banks expect to see an increase in lending for development and construction in the coming quarters as well.
Brian Nelson and Kevin Hemstreet are founders and principals of South Coast Commercial, a firm positioned at the forefront of both CRE and multi-family investments. They have been successfully finding assets for investors with favorable cap rates and increasing returns. “San Diego has shown great promise for buyers and sellers alike,” said Hemstreet. “Properties aren’t sitting on the market nearly as long as they were over the last several years. 2012 has shown remarkable resiliency. Banks have been loosening their money allowing for faster sales and greater demand.”
According to LoopNet, San Diego asking prices in Multi-Family properties have been trending upward during the last four quarters. CRE sales prices have ticked upward as well, a development that is encouraging to banks that are moving back into CRE lending after several years of dormany. “Our multifamily lending continues to be the largest growth category or strongest growth category, up about 10% annualized growth in the last six months,” said CFO and vice chairman, Doyle L Arnold, of Zions Bancorporation. Multifamily lending will be among the loans that People’s United Financial Inc. will pursue. “It will be one of the things we’ll be doing, but we’ll be doing all type of commercial real estate,” according to CFO Kirk W. Walters.
South Coast Commercial’s Nelson agrees that the fundamentals are stalwart and only improving. Their portfolio of investment properties is as strong as it has been since he and Hemstreet founded their firm in 2007. With rising prices and low rates, he knows that conditions are excellent for first-time sellers, 1031 exchanges and parties looking to enter the market for the first time. “An indication and encouraging sign of the improving markets is the number of developments that are breaking ground. No longer do we see trucks just pushing dirt around; Foundations are being poured. It’s a great indication that banks are looking at CRE and multifamily expansion as promising.”