Market Insights with Robert Vallera

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In our most recent Market Insights, Eric Northbrook sits down with Robert Vallera, Senior Vice President and Partner at Voit Real Estate Services to discuss the San Diego multifamily and apartment market.

What is the apartment/multifamily market looking like today as compared to the last couple years?

2020, obviously, we hit the COVID shoals, but in 2021, the market was very active. Lots of buyers, lot of sellers motivated to do transactions, and we’re doing volumes that we haven’t seen in 10, 20 years.

What are these buyers and sellers and looking for right now?

Sellers are typically long-time owners who have hit their commercial real estate goals. There has been a lot of appreciation in the market over the last decade, so a lot of sellers are cashing out. We also see some owner-operators who are getting tired of the increasing regulation of the rental market in California, and they’re doing tax-deferred exchanges and taking their money to states in the Southwest. Lastly, we also have owners who have assembled portfolios going back to the 1970s, who are passing on. In many cases, their families are breaking up the portfolios because there’s no one there to run it anymore and they’re selling the properties off.

For buyers, this is where it gets interesting. Because once again, we have buyers who are concerned about inflation, jumping in, acquiring hard assets as an inflation hedge. We also have people who are seeking cash flow. We can no longer get the type of returns they used to be able to get through the bond market, and so they’re acquiring income properties, like apartments to generate cash flow. Finally, there are syndicators, who are group investors picking up properties. These syndicators are being funded by private investors who want additional cash flow.

What’s to come in the next few years for the apartment/multifamily market?

This year looks really good for the apartment/multifamily market until the Fed “takes away the punch bowl” so to speak. When interest rates start going up, the market could start to calm down. Looking to the next few years, San Diego has strong employment growth, and therefore the market will continue to grow. So many industries, like tech, biotech, and life science are booming. That will continue to drive the rental market. The long-term future in San Diego is still looking bright. The quality of life in San Diego is better than in Los Angeles. In the Bay Area, we’re continuing to see an influx of people into San Diego. And as go’s employment over the long haul, so goes the apartment market.