Competition for renters in newly apartment-heavy downtown San Diego is getting fierce with one complex entering new tenants into a contest to win a $10,000 European vacation.
Alexan ALX in East Village opened at the start of the year and has some of the most amenities of any new apartment building — such as a saltwater pool on the 18th floor and a hidden speakeasy for residents — but it also is surrounded by a flurry of new apartments. It launched the contest July 15.
The vacancy rate for Alexan ALX is around 27 percent, high for San Diego but common for a new building. Its average asking rent is around $2,930 a month, said real estate tracker CoStar. That’s not very far off from surrounding buildings.
The rental offer is the latest in a trend of more concessions and rent reductions downtown among the surge of new luxury apartments that have opened in the past three years. Offers are especially noticeable in East Village with large complexes — Alexan ALX, Park 12, Pinnacle on the Park and Shift — all within blocks of each other.
“I think they have to offer concessions,” said CoStar senior market analyst Joshua Ohl. “There’s tons of supply coming online. It’s the only way they can compete to get renters.”
CoStar uses a team of 250 secret shoppers to figure out the latest deals at apartment complexes — from one month free rent to complimentary cable TV — used to entice affluent renters.
At the end of the second quarter, 21.3 percent of apartment communities in downtown San Diego were offering concessions, up from 18 percent at the same time in 2016, CoStar said. Nearly 16 percent were offering one month free rent, up from 9 percent at the same time in 2016.
Alexan ALX leasing manager Gergana Semerdjieva said they feel good about how much the building has filled up so far, but are very aware of competition surrounding them.
“We always want to keep our name at the top of everyone’s mind,” she said of the contest. “It’s just something else that is exciting that will drive the traffic through our doors. It’s something extra that gets people through our doors vs. other people’s doors.”
Semerdjieva said she thinks the 313-unit Alexan ALX has the best amenities downtown, but that doesn’t change the fact they are in the middle of an apartment boom. Shift, a 368-unit complex known for its orange tower, recently opened up across the street. Just a short walk away is the newly opened Park 12 with 718 units, the most of any apartment complex in San Diego history, and a second Pinnancle on the Park building will bring the complex’s total to 955 apartments.
She said they are betting potential renters will see the contest, get them to check out Alexan ALX and be impressed by the amenities.
Not everyone can enter the contest. It is limited to people who tour the building, then sign a 16-month lease and move in by Oct. 31. Current residents can get a ticket if they refer a person who ends up renting, or post a good review of the complex on Google or Facebook. The drawing for the contest is Nov. 3.
The vacancy rate for apartments in downtown San Diego is around 16 percent, much higher than the 3.8 percent number for the entire county. Rent is also higher, with an average asking rent of $2,452 per month compared to $1,786 for the county.
Mark Goldman, finance and real estate lecturer at San Diego State University, said it makes sense for new apartment buildings to ask for the highest rents they think they can get and decide from there what to do.
“If you are going to launch a new product, you’re going to want to bring it out at the highest price you can,” he said. “It’s easy to go down in price. It’s hard to go up.”
Goldman also said many of the apartment complexes could be overshooting the mark with asking rents because incomes in San Diego have not kept pace with rent increases. Also, the monthly price in many of the luxury units is comparable (or higher) to a monthly mortgage payment so he said some potential renters may just decide to buy.
Some promotions have ended at downtown complexes but there are still reductions to be had. The Rey, a 478-unit apartment in Cortez Hill opened at the beginning of 2017 and had a one month free rent deal until recently. While it might have ended the deal, it lowered rent prices two weeks ago. Average asking rent was up to $2,736 a month in 2017 but now is closer to $2,380.
Pinnacle on the Park in East Village, 483 units and the tallest residential tower in San Diego, is still offering up to two months free rent on select units nearly three years after opening. The average asking rent is $2,612, down from $2,972 in 2015.
Shift recently reduced rental rates and is offering up to two months free rent on some units. Average asking rent is 2,832 is a month, down from $3,133 at its height in 2017. It allows rent terms of six months, offering a shorter term than most year-long leases in the city.