What is the current San Diego apartment cap rate?
A cap rate is annual net operating income divided by price, before financing. Use the following evidence to choose and question comparables, then reconstruct the income a buyer can collect.
- Q3 2026 published cap
- 4.9%
- Quarterly change
- +10 bps
- Annual change
- -10 bps
One series, two comparison periods
| Q3 2025 | Q2 2026 | Q3 2026 |
|---|---|---|
| 5% | 4.8% | 4.9% |
Kidder reports Q3 vacancy of 5.0%, down from 5.3% a year earlier, and asking rents up 1.4%. Northmarq reports 5.2% vacancy, up 60 basis points annually. Coverage and methodology have not been reconciled; do not average these readings. Kidder Mathews: San Diego multifamily; Northmarq: San Diego multifamily Q3 2026.
Is this also the cap rate for office, retail, industrial or a single-family rental?
No. These apartment observations cannot price a different asset class. Office and retail leases involve different rollover, tenant-credit and capital obligations; industrial comparables have their own location and lease economics. Single-family rent/home-value indexes do not measure a matched property’s NOI.
For a house or duplex, use the single-family rental calculator with its actual rent and expenses. For broader regional comparisons, use our California cap-rate report.
What local news changes the San Diego outlook?
The reported events below are evidence. Their underwriting implications and our base case are RentalCalcs’ conditional interpretation, not publisher forecasts or a property appraisal.
The spring rent decline is a warning about leasing assumptions
Reported: KPBS reported March city listing data showing annual declines of 5.6% for one-bedroom asking rents and 7.5% for two-bedroom rents after a supply increase. KPBS: San Diego rent declines following supply growth.
Our assessment: Those figures do not contradict every later regional average: dates, unit mix and coverage differ. They do show why a buyer should verify executed leases and concessions in the actual bedroom category rather than underwrite an undifferentiated rent-growth headline.
Our position
Our base case is a split market: stabilized apartments with demonstrated collections can hold pricing better than assets whose rents depend on lease-up incentives or rapid mark-to-market. The evidence supports selective confidence, not a countywide compression call.
What would change our view: Consistent effective-rent growth across competing properties and tighter comparable sales would strengthen a compression case. Rising vacancy or persistent concessions would weaken it. The conflicting publisher vacancy series prevent a single definitive countywide occupancy conclusion.
San Diego submarkets: what changes the underwriting?
Use these distinctions to build a comparable set. Where a matching neighborhood cap sample is unavailable, the analysis remains qualitative; no rate is manufactured from a county rent index.
Del Mar / Carlsbad: test the premium against the actual product
Evidence: Northmarq reports 3.4% annual rent growth in its North Beaches grouping, with vacancy down 60 basis points. Northmarq: San Diego multifamily Q3 2026.
The favorable direction supports a stronger leasing thesis for matching coastal product. It does not establish a cap-rate discount for a specific building or mean an older property can achieve a newer property’s rents without investment.
Before bidding: Match amenities, unit size and condition, then subtract renovation downtime and concessions from the upside budget.
Hillcrest / University Heights: collected rents matter more than neighborhood labels
Evidence: Northmarq’s Balboa Park grouping, including Hillcrest and University Heights, reports 2.9% annual rent growth. Northmarq: San Diego multifamily Q3 2026.
An established neighborhood’s headline rent improvement can be useful evidence, but the acquisition earns the existing leases until renewal or lawful turnover. A small older building also has different repairs and financing from a new large community.
Before bidding: Build an occupied-unit rent schedule and document the timing and cost of any proposed increase.
El Cajon / Escondido: lower prices can reflect the sale mix
Evidence: Northmarq describes increased lower-class sales activity in markets including El Cajon and Escondido, alongside a larger Class A share of regional sales. Northmarq: San Diego multifamily Q3 2026.
That mixture makes an aggregate price-per-unit trend a poor substitute for subject-specific valuation. Cheaper units can come with capital needs; an expensive regional average can simply contain more newer buildings.
Before bidding: Separate building class, capital work and current NOI in the comparable-sale grid before interpreting a pricing trend.
Mission Valley and new lease-ups: model the effective-rent path
Evidence: Kidder reports 12,206 units under construction regionally; Northmarq’s different coverage reports about 8,900. Kidder Mathews: San Diego multifamily; Northmarq: San Diego multifamily Q3 2026.
Neither total tells a Mission Valley buyer how many direct competitors will open during renewals. Use the local delivery schedule and the subject’s unit type; regional pipeline counts are context, not a property vacancy forecast.
Before bidding: Track active construction, expected openings and actual leasing specials among direct competitors. Treat unverified completion dates as scenarios.
What would cause compression or expansion here?
Compression means a lower cap and a higher price for unchanged NOI. Expansion means a higher cap and a lower price for unchanged NOI. Income changes can offset or amplify either move. These are conditional cases, with no assigned probabilities or promised cap targets.
Compression case
Absorption catches up with competing deliveries and incentives recede while comparable buyers accept lower income yields.
Watch: Executed effective rents and same-product sale caps, especially in stronger coastal groupings.
Underwrite: Use a lower exit cap as upside until the property earns the supporting NOI.
Base case: product selection
Coastal and established infill strength coexists with lease-up competition and mixed operating reports.
Watch: The subject’s collections, renewal losses and competitive specials.
Underwrite: Run separate stabilized and lease-up budgets instead of applying one county vacancy assumption.
Expansion case
Concessions persist or higher operating and financing costs reduce supported bids.
Watch: Worsening effective rents despite nominal asking-rent growth.
Underwrite: Stress a wider exit cap with a concession-adjusted NOI; keep capital work outside recurring expenses but inside the equity budget.
San Diego: face rent versus the first lease year
On an illustrative $2,500 monthly lease, how much does a free-rent offer reduce annual income?
| Scenario | Annual amount |
|---|---|
| No free month | $30,000 |
| One free month | $27,500 |
| Two free months | $25,000 |
Apply the offer to the correct units and lease years. A temporary concession should not automatically become a perpetual loss, but excluding it from first-year cash flow overstates the acquisition’s yield.
- Identify the local exposureMatch amenities, unit size and condition, then subtract renovation downtime and concessions from the upside budget.
- Translate it into collected incomeApply the cost or rent change to the affected units and dates. Separate recurring operations from capital work.
- Reprice the riskDivide buyer NOI by a justified cap, then test debt coverage, invested cash and resale sensitivity.
What does a cap-rate change do to value?
Value = annual NOI ÷ (cap rate ÷ 100). The fixed table below uses $100,000 starting NOI and the report’s 4.9% benchmark only as a mathematical reference, not a recommendation to buy at that cap.
| Exit cap | 0% total NOI growth | 10% total NOI growth | 20% total NOI growth |
|---|---|---|---|
| 4.40% | +11.4% | +22.5% | +33.6% |
| 4.90% | 0.0% | +10.0% | +20.0% |
| 5.40% | -9.3% | -0.2% | +8.9% |
| 5.90% | -16.9% | -8.6% | -0.3% |
Fixed reference matrix. NOI growth is cumulative, not annual. Starting value is $2,040,816. Excludes selling costs, debt payoff, taxes and interim cash flow. The editable tool has its own clearly labeled initial 5% → 6% example.
Hypothetical assumptions. NOI change is cumulative over your chosen holding period, not an annual growth rate. Results exclude debt, sale costs, taxes and interim cash flow.
Starting value $2,000,000
Exit value $1,833,333 (-8.3%)
$100,000 starting NOI at 5% → $110,000 exit NOI at 6%. NOI must change by 20.0% to preserve starting value at this exit cap rate.
A coherent acquisition: cap rate is not cash-on-cash return
This shared $2 million teaching example is hypothetical, not a local sale or a financing quote. It illustrates the same accounting you should apply to the local risks above.
| Purchase price | $2,000,000 |
|---|---|
| Scheduled rent | $240,000 |
| Vacancy / collection loss (5%) | -$12,000 |
| Effective gross income | $228,000 |
| Recurring expenses, including buyer taxes and insurance | -$128,000 |
| NOI, before financing | $100,000 |
| Loan principal (60% of price) | $1,200,000 |
| Annual debt service: 6.5%, 30-year amortization | $91,018 |
| Annual replacement reserve, below NOI | $10,000 |
| Cash after debt and reserve | -$1,018 |
| Closing costs, one time | $60,000 |
| Immediate capital work, one time | $40,000 |
| Total invested cash: down payment + closing + work | $900,000 |
Going-in cap: 5.00%. Cash-on-cash after the reserve: -0.11%. DSCR before the reserve: 1.10×; after the reserve: 0.99×. Debt yield before reserves: 8.33%. Ask which reserve convention the lender uses.
The expense allowance is a teaching assumption, not a local expense ratio. Replace it with line items, buyer tax estimates and insurance quotes. Capital work is outside NOI but inside invested cash; no return from that work is assumed.
What to verify before buying in San Diego
- Verify San Diego city tenant protections separately from the rules in other county municipalities.
- Compare executed effective rents for the same bedroom count; an average skewed toward larger or newer units is not a renewal assumption.
- Obtain tax and insurance estimates and price immediate work before comparing a small older building with a Class A community.
California reassessment can change the buyer’s tax expense. Use the Board of Equalization’s change-in-ownership guidance and the local assessor to confirm treatment and exceptions; do not substitute the seller’s bill or a blanket statewide percentage.
Why a rent/home-value ratio is not a cap rate
A county rent index and home-value index describe different samples and may have different observation dates. Their ratio is a broad gross screen, before operating costs. It is neither a matched apartment sale yield nor evidence of neighborhood cap compression. Use dated apartment research and property-level NOI tests instead.
A free deal-review worksheet
Record the subject’s address and municipality, each comparable’s date and income basis, collected rent, losses, buyer expenses, debt quote and capital needs. Then write the evidence that would make you reject your preferred outlook.
Open the printable San Diego underwriting worksheet. It works without an account; entries are not saved to an account.
Underwrite a specific apartment propertyThe calculator opens separately. Assumptions entered above are not transferred. Core analysis is free; optional paid workflows are described in the tool.
What is a good cap rate in San Diego?
One that is supported by comparable sales and produces a durable return after your actual costs, debt and capital work. A higher headline rate can compensate for weaker collections or more work. A lower rate requires more confidence in the income and resale assumptions. Start with buyer NOI, then test the local downside described here.
Sources, methods and what this report cannot establish
Sources accessed October 18, 2026. Observation periods differ from publication and review dates. Brokerage sources have a commercial context; multiple publishers using CoStar are not independent samples. The local-news interpretation is ours. We have not audited individual transaction NOI or assigned a market cap to every neighborhood.
- Kidder Mathews: San Diego multifamily
Q3 2026; Q2 2026 and Q3 2025 comparators. Publication day not stated.
CoStar-sourced published average series and operating indicators. Cap sample size, weighting and NOI convention not disclosed in the public summary. Brokerage research; not an independent appraisal.
- Northmarq: San Diego multifamily Q3 2026
Published October 15, 2026. Q3 operating data; year-to-date sales cap average.
Brokerage report. Sample/NOI detail for caps not fully disclosed on the summary. Vacancy and pipeline coverage differ from Kidder; differences unresolved. Not treated as an independent identical sample.
- KPBS: San Diego rent declines following supply growth
March 27, 2026; city listing rents, annual comparison.
Local reporting using Zumper listing data. Bedroom-specific asking rents, not existing-tenant collections or Q3 regional rents.
Refresh triggers: the next quarterly market report; revisions to a sale cohort; actual openings or delays in discussed projects; material changes in local rules, financing or property expenses. Update the analysis and comparisons together, rather than changing only the date.
Spot a source correction or geography error? Contact RentalCalcs with the report section and supporting document.