{"id":950179,"date":"2026-07-21T18:49:16","date_gmt":"2026-07-21T18:49:16","guid":{"rendered":"https:\/\/www.europesays.com\/us\/950179\/"},"modified":"2026-07-21T18:49:16","modified_gmt":"2026-07-21T18:49:16","slug":"los-angeles-moribund-multifamily-market-shows-signs-of-life-commercial-observer","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/950179\/","title":{"rendered":"Los Angeles\u2019 Moribund Multifamily Market Shows Signs of Life \u2013 Commercial Observer"},"content":{"rendered":"

In a market where finding a development opportunity is akin to \u201cfinding a needle in a haystack<\/a>,\u201d and existing policy can \u201cbreak the backs<\/a>\u201d of developers who want to build housing, it follows that a majority of the development community has<\/a> \u201credlined\u201d it to curtail future investment.\u00a0\u00a0<\/p>\n

It\u2019s no surprise to hear that multifamily development in Los Angeles has become costlier, more tedious, and more rare.<\/p>\n

SEE ALSO: The Plan: At the Windsor in Brooklyn\u2019s Windsor Terrace, Assume Nothing<\/a><\/p>\n

Developers face rising construction and labor costs, regulatory challenges and the city\u2019s Measure ULA transfer tax, and persistent issues with financing. This year, only 8,500 units are expected to be added in the Los Angeles metro area, and rents will budge up just 1 percent, according to a recent Marcus & Millichap report<\/a> \u2014 not exactly green flags for making big multifamily investments.<\/p>\n

But, despite the apparent doldrums hamstringing the housing sector, there have been signs of life and significant increases in certain types of multifamily asset sales. While quarterly multifamily sales by dollar amount hit a recent peak in mid-2025, per CBRE<\/a> \u2014 and then fell by 50 percent in the first quarter of 2026<\/a> compared to the final quarter of 2025 \u2014 sales volume and the number of units sold has recently jumped in certain key categories.\u00a0<\/p>\n

According to the Marcus & Millichap<\/a> report, multifamily deal flow in the L.A. metro improved 25 percent in the year ending in March, with particular growth in Class C properties selling for $1 million to $5 million. Private investors are filling that gap, said John Chang, senior vice president and chief intelligence and analytics officer for Marcus & Millichap. Private investors closed 66 percent of the multifamily sales volume.\u00a0<\/p>\n

\"740740 South Burnside Avenue, Los Angeles. PHOTO: Courtesy Marcus & Millichap<\/p>\n

\u201cThere\u2019s always going to be a lot of demand to live here, and the economics of buying an existing property and trying to build somewhere are very, very different,\u201d said Joshua Baum, founding principal of Hilgard Economics<\/a>. \u201cInvestors see an opportunity to make money buying lower-value multifamily.\u201d<\/p>\n

Another research brief by NAI Capital<\/a> found that multifamily sales volume had spiked more than 25 percent in just the second quarter, with the number of units sold climbing 39 percent. In particular, said J.C. Casillas, NAI\u2019s managing director of research, sales of properties above $10 million actually grew the fastest last quarter.\u00a0<\/p>\n

\u201cThere\u2019s just a velocity in the market,\u201d he said. In one example, Prime Residential\u2019s acquisition of a 132-unit complex<\/a> in L.A.\u2019s Miracle Mile on the last day of June for $51.3 million, hit $388,000 per unit, a significant improvement over the current price-per-unit average of around $300,000<\/a>, per CBRE.\u00a0\u00a0<\/p>\n

\u201cIf you\u2019re a good operator, you\u2019re going to take advantage of the chance to get, say, 85 units to add to your portfolio,\u201d said Casillas. \u201cThere is demand on the buyer side. Operating costs are huge, so you have to have the reserves.\u201d<\/p>\n

It\u2019s a good time to acquire housing assets since interest rates are expected to remain steady for the foreseeable future, and the permitting and construction pipeline for Los Angeles look anemic going forward \u2014 just over 25,000 units are in the pipeline, a contraction from last year<\/a>. Factor in the L.A. proper\u2019s move to neuter full implementation of SB 79<\/a>, the new statewide rule to upzone properties around transit, and there is \u201cless of a threat of a large supply surplus coming onto the market,\u201d said Samuel Maury-Holmes, founder of Zenith Economics<\/a>.<\/p>\n

\u201cCap rates are some of the highest we\u2019ve seen in years,\u201d said Chang. \u201cI haven\u2019t seen opportunities like this in 10 years. When the right assets become available, you have to jump on them. The last time there was an opportunity like this was the Great Financial Crisis.\u201d<\/p>\n

These figures come with serious caveats. The boom in relatively low-dollar asset sales can be connected directly to Measure ULA, the so-called \u201cmansion tax\u201d that went into effect in April 2023 and has had a detrimental effect on sales, according to recent research<\/a>. The levies started at 4 percent for sales at $5 million but a built-in tie to inflation has since raised the threshold to $5.4 million \u2014 hence the jump in lower cost sales below the threshold.\u00a0<\/p>\n

These policy-mandated thresholds incentivize investors to look more at smaller buildings, said Maury-Holmes.<\/p>\n

\u201cYou\u2019re looking at a lot of deals for five to 15 units, maybe even a duplex, that are very safely under that threshold, and will be attracting a lot more capital,\u201d said Maury-Holmes. He added that investors would be particularly interested in properties far enough below the $5.4 million threshold that buyers could make capital improvements and perhaps add ADUs without the threat of ULA.<\/p>\n

\u201c\u200b\u200bAt the end of the day, it\u2019s more expensive to finance a much bigger project, whatever the interest rate is,\u201d said Baum.<\/p>\n

The tax is clearly affecting the total dollar volume of transactions. Marcus & Millichap found sales above the higher ULA threshold in the year ending in March were down 50 percent from the multi-year average before the measure was passed.\u00a0<\/p>\n

What explains the bump in the number of sales and activity amid the mostly lackluster popular sentiment around the city\u2019s apartment market? The job market remains steady and financing may be tighter, but sales are still seeing an uptick.\u00a0<\/p>\n

The population shift away from Los Angeles has tapered in recent years, said Chang. Part of the shift, said Casillas, comes from uncertainty and fatigue around Measure ULA. After a few high-profile attempts to reform the measure failed at the state and city level, the market may simply be accepting, reacting and transacting amid a new normal.\u00a0<\/p>\n

\u201cYou have the economics and the anxiety all of a sudden finally clearing in the marketplace, and people have decided to sell, and on the other side, buyers have decided to jump in,\u201d said Casillas.<\/p>\n

There\u2019s also changing sales volume depending on the property value. Units sold for properties between $5.5 million and $10.6 million \u2014 the lowest rung on ULA\u2019s sliding scale of taxation \u2014 jumped 41 percent last year, said Casillas, though the price remains low.\u00a0<\/p>\n

\u201cThe market has had a strong rebound,\u201d said Casillas. \u201cIt\u2019s just not uniform.\u201d<\/p>\n

A lot of the smaller assets sales are sales of necessity, Casillas believes, with landlords and operators feeling burnt out from the business, and transacting with owner users who believe they can capitalize on these smaller apartments.\u00a0<\/p>\n

But any bit of good news in selective sales niches comes amid troubling signs for the market. The same NAI report found that even with increased transaction volume, the average price per unit declined 12.9 percent last quarter to $285,504. (It\u2019s fallen by a quarter since 2022<\/a>.)<\/p>\n

Developers continue to feel priced out. The number of units under construction dropped 23.6 percent compared to last year. While the shrinking pipeline may eventually tighten supply and support rent growth, it still underscores wider concerns and hurdles to making multifamily pencil in Los Angeles.<\/p>\n

Plus, L.A. remains a city of immigrants \u2014 4 million of whom lived in the region as of 2023<\/a> \u2014 and ramped-up immigration enforcement and policy shifts continue to impact this core renter population.<\/p>\n

While there\u2019s decidedly more action happening on the lower end of the market, Maury-Holmes said any shift in deal volume still doesn\u2019t include institutional investors, who he said have largely turned, or are turning, away from the Los Angeles market.<\/p>\n

Perhaps more damaging to the city\u2019s affordability problems, the warping of the market by ULA can have further downstream impacts. Maury-Holmes noted the irony of ULA, formed to create a more stable supply of affordable housing for the city, creating investment thresholds and pushing capital towards smaller, lower-cost buildings \u2014 the type that tend to classically be considered the most naturally occurring affordable housing \u2014 and incentivizing capital investment in said properties that may make them less affordable. But he said there may be buyers out there simply seeking to assemble portfolios of smaller buildings, instead of picking up units in one fell swoop.<\/p>\n

\u201cThere\u2019s durability in Los Angeles,\u201d said Chang. \u201cAnd the differential between homeownership and rental is gigantic here, and I don\u2019t see housing becoming more affordable anytime soon.\u201d<\/p>\n

Capital will always find a way in an in-demand market. But the numerous barriers to bigger investments only underscore the feeling that opportunities are being missed. <\/p>\n","protected":false},"excerpt":{"rendered":"In a market where finding a development opportunity is akin to \u201cfinding a needle in a haystack,\u201d and…\n","protected":false},"author":3,"featured_media":950180,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[5123],"tags":[1582,276,4282,2556,93049,178613,263031,382562,2961,224,5337,27250,382563,122035],"class_list":["post-950179","post","type-post","status-publish","format-standard","has-post-thumbnail","category-los-angeles","tag-ca","tag-california","tag-channel","tag-development","tag-investments-sales","tag-j-c-casillas","tag-john-chang","tag-joshua-baum","tag-la","tag-los-angeles","tag-losangeles","tag-measure-ula","tag-samuel-maury-holmes","tag-sb-79"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/116959469146803033","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/950179","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=950179"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/950179\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/950180"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=950179"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=950179"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=950179"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}