San Luis Obispo offers numerous features that make it an attractive area. It has a mild climate throughout the year, a strong university system filled with students and faculty that provide inelastic demand for local housing, an outdoor lifestyle stretching along the Central Coast and a vibrant cultural backdrop. Residents and tourists here are drawn to the quaint coastal towns from Avila Beach to Pismo Beach and historic cities such as Arroyo Grande. Those are filled with boutique shopping and restaurants, not to mention cultural and outdoor activities, and 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.
The availability rate is trending at 4.1% during the second quarter. While that is still low from a historical perspective, it's the highest level since 2022. With the exception of 24Q1, net absorption has been positive in nearly every quarter since 2021.
Single-tenant availability has been relatively stable over the past several years, hovering near 3% during the second quarter. Multi-tenant availability has ticked up above 5% in 2024, although it is low from a historical perspective and is coming off the lowest level, just shy of 5%, in the past 15 years.
Retailers do have some options in new inventory. Roughly 200,000 SF is under construction, and almost 50,000 SF of that space is available for lease.
Rents have shifted by 2.6% in the past 12 months and by 18.4% during the past five years. Rent growth has moderated off a cyclical peak of 4.7% in mid-2023. However, rent growth should outpace the historical benchmark in the coming quarters.
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