Multi-Family Capital Markets

Multifamily sales in the Inland Empire have shown notable improvement recently. In the first quarter of 2024, sales volume was under $50 million, marking the lowest level since the Great Recession in 2009. However, things picked up significantly in the following quarters: sales rose to $235 million in the second quarter and hit $400 million in the third quarter, surpassing the total for all of 2023, which was $588 million. This was a decline from $1.9 billion in 2022 and a record $3.2 billion in 2021. Only 82 apartment properties changed hands in 2023, but the first three quarters of 2024 saw nearly 90 transactions.

Private investors and private equity firms have been the main players in the market, historically accounting for almost 70% of acquisition volume. In contrast, institutional investors and REITs have slowed down, making up over 25% of the buying volume in the past but contributing less than 5% in the past year as access to debt tightened and cap rates increased. Many institutional investors have also been selling off properties.

As of the fourth quarter of 2024, the average price per unit has dropped to $270,000, down from a peak of $310,000 in 2022, with cap rates now averaging around 5.7%. They typically range from 4.3% to 6% at the high end. Looking ahead, favorable long-term demographic trends are expected to boost valuations again starting in 2025 as cap rates begin to decline.

In the second quarter of 2024, two significant deals over $10 million closed, each featuring seller financing or debt assumption at low 5% cap rates. Although much institutional capital remains on the sidelines, private buyers have stepped in to capitalize on the reduced competition for larger apartment complexes. For instance, San Francisco-based Bell Partners purchased a 492-unit complex at 25100 Vista Murrieta, previously known as Silverado Apartment Homes, for $146.5 million (around $298,000 per unit) at a 5.2% cap rate, assuming $82 million in financing from the seller—reportedly about 300 basis points lower than current 2024 rates.

In Riverside, private investors sold the 56-unit Sago Palms Apartments for $15 million (about $268,000 per unit) at a 5.35% cap rate in April 2024. The community was 92% leased at the time of sale and was purchased with seller financing. Meanwhile, Oceanside-based Vanamore Investments acquired the LuxLiv complex, a 62-unit property built in 2013, for $19.75 million (approximately $319,000 per unit) at a 6.3% cap rate in August 2024. The buyers have plans for renovations, bedroom conversions, and solar panel installations as part of their value-add strategy.

Source: CoStar Research