— By Cray Carlson of CBRE —
The Inland Empire multifamily market remains one of the premier markets to invest in across Southern California, benefiting from ample land availability and less restrictive regulations than many neighboring markets.
Still, like many markets, there was a disconnect between buyers and sellers in 2024 and 2025 due to interest rates. It remains psychologically difficult for investors to sell a property with an existing 3.5 percent interest rate and complete a 1031 exchange into an asset carrying a 6 percent rate. That spread creates a meaningful mental hurdle, and has prevented many owners from disposing of their properties.
That hesitation, however, has not erased opportunity. There are still great opportunities in the market, even with a 6 percent interest rate. The economic fundamentals remain strong, and cap rates have increased even amid higher interest rates. Cap rates have climbed since last year, and there are still great returns to be had. While many investors continue to struggle with the reality of higher borrowing costs, escalated interest rates are not going anywhere in the near term.
In 2024, the Inland Empire recorded 74 multifamily transactions of eight units or more. As of the beginning of December 2025, there have been roughly 70 transactions. Investors who are selling tend to be those with a specific need or catalyst to transact, rather than discretionary sellers. Total sales consideration in the Inland Empire was about $925 million in 2024, compared to 2025’s total sales consideration of $1.07 billion. In practical terms, that reflects relatively stable dollar volume year over year. Average cap rates were 5.24 percent in 2024 compared to 5.65 percent in 2025.
Is the market back to where it was in 2021 and 2022? Not yet, but it is on its way. We know there is a correlation between lower interest rates and higher sales volume. Many believed that interest rates would have dropped more over the past year than they have. Whatever the reasons, they have not declined as quickly as investors would like, which has caused many to adopt a wait-and-see approach to selling.
I do not expect a return to the 3 percent interest rates seen in 2020, but I do believe we will see interest rates decline more in 2026 than they did in 2024 and 2025 combined. Only time will tell, but the Inland Empire multifamily market continues to stand out as an exceptionally strong long-term investment market.
— By Cray Carlson, senior vice president of CBRE. This article was originally published in the December 2025 issue of Western Real Estate Business.