Just about everyone has a list of what they love about San Diego. This is a city that’s known for its sunny beaches and culturally rich neighborhoods. There’s an art scene and plenty of history. There’s good shopping and great dining, and the qualities that make San Diego a great place to live stretch on and on, creating a competitive and highly sought-after real estate market.
Who wouldn’t want to live in San Diego?
The San Diego Union-Tribune recently reported on a Redfin study that showed San Diego has the fourth-highest percentage of renters in the nation. There are plenty of reasons for this; homeownership rates in general have fallen across the country, and especially in already-pricey markets like ours. Recent statistics show that about 48% of households in the San Diego metro area are renters, not owners.
That’s a big market for rental property investors.
If you’re already renting out homes here, you know that tenant demand is high and those residents are often well-qualified and ready to move in. If you’re thinking about investing in San Diego, you’ll want to get an idea of what kind of market you’re stepping into. It’s not like other markets.
It doesn’t take an expert to understand why San Diego has caught the attention of real estate investors in recent years. Now that we’re moving through 2025, it’s time to think about what the rest of the year looks like, and how investors can stay ahead of the curve to capitalize on the latest trends impacting the rental market.
The real estate sales market impacts the rental market. The local economy does, too. Despite what might be going on in general, however, San Diego has always been a fairly strong rental market. Even during the pandemic and even during economic downturns, investors do well here. The key is understanding the shifts in market dynamics, tenant demands, and competition.
Here are some of our insights as professional San Diego property management experts. We believe these are the things that will help you make informed decisions to maximize ROI.
Rising Demand for Urban Rentals
Wondering where to invest? The answer might surprise you.
We work with investors who are focused exclusively on single-family homes in suburban areas of San Diego. That’s always going to be a winning strategy. This is where many of the well-qualified residents are looking. They want space. They want privacy. They want the experience of living in their own home without the costs and the commitment.
Lately, however, there’s a new area of the market that is surging and we believe 2025 will be a big year for these particular locations. We’re talking about city living. The demand for rentals in urban hubs like downtown San Diego, Little Italy, and Hillcrest continues to grow.
If you’re looking to diversify a growing real estate portfolio of San Diego rental properties, this is one good way to do it. Driven by professionals and students seeking proximity to work, schools, and entertainment options, these neighborhoods are hotspots for rental properties. They’re also growing in popularity with retirees, who want a low-maintenance lifestyle and an invitation to remain active.
Here’s what we’re recommending to investors interested in this trend: focus on areas with walkable neighborhoods and strong amenities. Urban rentals remain competitive but offer consistent returns thanks to steady tenant demand.
Increased Popularity of ADUs (Accessory Dwelling Units)
Here’s a trend that began to take hold as housing expenses grew thanks to inflation and rising rental rates throughout the city and all over the countries.
ADUs are on the rise as San Diego continues to incentivize homeowners and investors to build secondary units on existing properties. With streamlined permits and tax benefits for ADU development, San Diego is making it easier than ever to create rental opportunities on a single lot.
Interested in the idea but not sure how to get started? Talk to us about it. Savvy landlords are using ADUs to increase the earning potential of their properties. Going forward, investing in ADUs could provide cost-effective options to target the region’s growing renter base. It can also solve the problem of diminishing supply.
Going Green: San Diego’s Shift Toward Eco-Friendly Rental Housing
Sustainability is a trend that has been gaining momentum over the last few years.
It’s a term that means different things to different people.
But, when we’re talking about sustainability in San Diego rental homes, we’re talking about a few things in particular.
- Renters are prioritizing green features like solar panels, energy-efficient appliances, and water-saving fixtures.
- Areas such as North Park and La Jolla have seen a sharp increase in demand for eco-conscious rentals.
- California’s continuing push for a cleaner environment means stricter regulations on energy use for landlords are likely coming. This is an opportunity to get ahead of that.
Consider upgrading your rental properties with environmentally friendly features. Not only will you attract long-term tenants, but you’ll also increase your property value while staying compliant with future regulations. You’ll be making upgrades and updates during turnovers anyway, why not make them with sustainability in mind? It’s good business practice, and it keeps your operational costs in check.
Growing Demand for Luxury Rentals
San Diego attracts a diverse tenant base.
With its beautiful coastline and active business districts, San Diego has always been a destination for high-net-worth individuals. Recent trends suggest a growing appetite for luxury rentals offering high-end finishes, premium amenities, and concierge-like services, particularly in neighborhoods such as Del Mar, Coronado, and Pacific Beach.
If high-end rentals are part of your investment strategy, this is the right market for you. If you’re looking for an opportunity to diversify into a different asset class, consider this possibility. Luxury properties cater to a niche market, but they also promise higher yields. If you’re willing to invest in premium property upgrades, you could tap into this lucrative market segment.
Tech-Driven Property Management
Technology is hardly a trend that’s new to the 2025 rental market in San Diego.
Tools have evolved over the years, and the technology that’s available to us continues to revolutionize how properties are leased, managed, and maintained, especially in metropolitan areas like San Diego. Tenants increasingly expect conveniences like online payment portals, virtual showings, and smart devices like keyless entry and smart thermostats. We’re providing these things already, and we’re also investing in new technology to manage your property, such as Artificial Intelligence (AI) and the Internet of Things (IoT), which can help us predict when maintenance needs will occur, and how best to approach them.
Investors who integrate tech-driven solutions into their rentals can reduce vacancies and operational costs, while offering the seamless living experience tenants desire.
Rise of Remote Work Impacting Suburban Rentals
There’s a lot of press lately about the federal government calling its remote workers back into the office, but outside of that blip, the trend continues to gain traction. More and more people are working from home, at least part of their professional time.
Remote work is reshaping renter preferences, with a noticeable shift toward suburban communities like Chula Vista, Carlsbad, and Encinitas. These areas offer more spacious rentals and better quality of life, attracting families and remote workers seeking alternatives to dense urban living. There’s also a population of remote workers who are choosing city life, too, however. We mentioned the growth in urban demand earlier. These remote workers want to be close to co-working spaces and cafés.
Rental Affordability Challenges
Affordability remains top of mind for renters. Rising housing costs are pushing a growing percentage of San Diego’s population toward renting instead of buying. Properties that offer a good balance between value and affordability are likely to see consistent demand. Work with San Diego property management experts to strategically price your rentals. Pricing your property correctly ensures you remain competitive while securing strong tenant retention rates.
Legislation Alerts for Landlords
Oh, so many trends in California rental laws are coming at us in 2025 that it’s hard to know where to start.
- There are new requirements around credit reporting when tenants pay rent on time.
- Landlords who collect a security deposit must now provide tenants with photos of units before and after they move in and out.
- If you’re collecting an application fee, you’ll need to screen applications in the order in which they were received, with the first application to meet your standards being approved.
These are just a few examples of the new and evolving legislation in San Diego and throughout California. There are also changes to the timing of a tenant’s response in eviction actions, and other updates to the just cause eviction laws. It’s never been more important to have the support of a San Diego property manager. Legal mistakes are easy to make in 2025.
This is just the beginning of the conversation we want to have around trends in the rental market and in real estate investing. Let’s talk about these trends and others, and how they might impact your San Diego rentals in particular. Contact us at Chase Pacific Property Management & Real Estate Services.
