Investors Look for Value as San Diego’s Multifamily Market Adjusts to Higher Rates

Written by:

Steve Marcinuk

Date:

19 Jan 2026

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After more than two years of rising interest rates, higher construction costs, and softening rents, the San Diego multifamily market is showing early signs that prices may have stabilized. Market veterans who weathered the last significant downturn now see familiar patterns emerging, with some investors returning to the hunt for value amid cautious optimism.

Aaron Bove, newly appointed Executive Vice President at Colliers, brings deep experience to this inflection point. After 24 years at Marcus & Millichap—where he was San Diego’s top multifamily agent and the company’s leading national land broker—Bove’s move to Colliers reflects both personal ambition and the shifting landscape of commercial real estate in Southern California.

“It feels very similar to back in that 2008-2009 range, where the more seasoned buyers are looking for good deals, buying in anticipation of movement,” Bove says. “But we still need to see rents come back up, and we need to see interest rates come down to really see any real activity out here.”

A Strategic Career Move

Bove’s transition to Colliers after nearly a quarter-century marks more than a brokerage switch—it signals a shift in how experienced professionals are adapting their careers to a challenging market. His decision was driven by a desire for greater resources and the flexibility to tailor his business environment to better serve clients.

“Even after 24-25 years, you’re continuing to push, reinvent yourself, and look to do what’s best for the client,” Bove says. “It’s about value-add for the client.”

At Colliers, Bove has expanded his platform beyond multifamily sales to land transactions, leveraging his national reputation in both sectors. This diversification is a direct response to slower deal flow, as brokers seek multiple revenue streams to offset a decline in traditional transaction volume.

Building for the Future

A key part of Bove’s new chapter is team building and mentorship. He has assembled a group that includes Emily, who brings development expertise to support land and redevelopment deals, along with two other experienced professionals and Casey, his longtime assistant of nearly seven years.

“A lot of what I’ve found recent fulfillment in is helping and giving back,” Bove explains. “There’s the mentoring aspect—it’s a way of giving back to the younger generation, but you’re also creating your own work environment. I’m not going to be doing this forever, and as I think about the time I have still in this career, you start to think about legacy and building the team around you.”

Market Conditions and Buyer Behavior

San Diego’s multifamily sector, long known for its resilience and compressed cap rates, is adjusting to a more challenging environment. High interest rates, inflation, increased operating costs, and softening rents have combined to slow both buyer and seller activity.

“There seem to be more sellers out there than buyers, and people are still looking for value-add, looking for a deal,” Bove observes. Buyer demand has shifted toward properties with potential for additional income streams, particularly those that can capitalize on recent changes to accessory dwelling unit (ADU) laws.

“There is a lot of appetite for value-add deals where buyers are looking for properties where they can convert garages or carports into ADUs, or where there’s underutilized land in the backyard, or larger lots where you can build more units,” he says.

Development Challenges and Opportunities

On the development side, San Diego’s push to encourage housing production—through policies such as waived density, parking, and height requirements for complete community projects—has had mixed results.

“You see a lot of projects with no parking, but recently the appetite for those deals is very low,” Bove notes. “Projects without parking have lower demand on both the rental side, and when somebody has tried to sell them, you’re needing to increase the cap rate by 50 basis points plus to compensate for no parking.”

This market feedback is already shaping the next wave of projects. “You’re starting to see more projects with at least a 75% parking ratio. Ideally, it’s one-to-one,” Bove explains, underscoring how developers are responding to tenant and buyer preferences even when regulations allow more flexibility.

The development pipeline is also under pressure, with many projects nearing the end of their approval periods. “A lot of these projects are coming to the end of their approvals. Permits are expiring. So everybody’s wondering what they’re going to do. They can’t refinance. It doesn’t make sense for them to build. Everybody’s wanting to get their money back.”

Capital Markets Reality

The gap between what sellers expect and what buyers are willing to pay—the “bid-ask gap”—continues to limit deal activity. Despite talk of available capital on the sidelines, most owners see little incentive to sell unless they must.

“It’s just that bid-ask gap between buyer and seller,” Bove says. “There’s not a ton of reasons for long-term owners to sell in this market.”

For institutional investors, San Diego’s limited deal flow poses a challenge. “It’s harder for institutional capital to get into our space. There’s just a limited number of deals down here,” Bove notes. As a result, the market is driven more by local buyers and private clients seeking value-add opportunities than by large-scale institutional capital.

The cycle of market optimism followed by disappointment is now familiar. “It seems like everybody’s ready to go, but then the year just kind of fizzles,” Bove observes, pointing to the difficulty of making deals work with current interest rates and operating conditions.

Looking Ahead

As the market approaches 2026, Bove is watching for signs of a proper recovery. “We are in a market cycle where, usually, towards the end of the year, you see softening, flattening, or even a decrease in rents. It’s going to be very important to see what happens in the first quarter or two.”

The key, he says, is whether rent growth returns. “Signs point to a strong economy, but we need to see it in rent growth. I think that’ll be the major driver people are looking at here in San Diego, outside of interest rates.”

For those active in the market, patience and strategic positioning are essential. Transaction volume remains low, but professionals like Bove are using this period to strengthen their teams, expand their services, and prepare for the next phase.

San Diego’s multifamily market remains underpinned by supply constraints and steady demand, suggesting that once conditions improve, the rebound could be rapid. For now, the focus is on identifying properties with value-add potential—especially those benefiting from regulatory changes around ADUs—while waiting for economic signals that will give both buyers and sellers the confidence to return in force.

Experienced brokers are positioning themselves for when the market does turn, using this slower period to invest in training, team-building, and diversification. Bove’s move to Colliers and his emphasis on mentorship and service reflect a broader recognition among industry veterans: in a challenging environment, adaptability and preparation are as valuable as any deal.