San Luis Obispo County Multifamily Market Snapshot
Residents and tourists here are drawn to the quaint coastal towns from Avila Beach to Pismo Beach, along with historic cities such as Arroyo Grande. Those are filled with boutique shopping and restaurants, not to mention cultural and outdoor activities. This area includes some of California's best vineyards in Paso Robles.
Cal Poly is located here, which produces graduates for the local job market. More than 20,000 students are enrolled at the university, and the school provides beds for more than 8,000 of them, providing a source of inelastic demand for local rentals.
Overall net absorption has largely returned to what was typical from 2015 to 2019, even as economic concerns still weigh on household budgets. Both the spring and summer leasing systems were the first "normal" ones since 2019.
North SLO, has still not stabilized following the early 2022 delivery of the 206-unit Emerald Ridge Apartments in Atascadero. That sent the vacancy rate into double digits for the first time in more than 10 years. With North SLO's vacancy already elevated, Arrive Paso Robles delivered in mid-2023 with 200 units. That delivery pushed North SLO's vacancy above 15%, and the market's overall rate to 9.5%, which is trending at its highest level in more than 10 years.
Supply-side pressure should ease in the coming quarters with only about 73 units in the pipeline. Starts are expected to remain muted due to the elevated cost of debt which has made securing construction financing more difficult, which should ease pressure on the high vacancy rate. Annual rent growth has moderated to 2.3%. That compares to the average of 3.6% between 2015 and 2019.
North SLO has fared worse over the past year with modest demand and elevated vacancy, while South SLO has driven rent growth in the region during this period. Sales activity has been historically modest here given the limited inventory, and the rapid rise in interest rates has only complicated the investment picture in recent quarters. Investors have been navigating a period of pricing discovery.