Average Cap Rates for Commercial Real Estate in Los Angeles — 2025/2026 Data
Los Angeles commercial real estate cap rates in 2026 range from under 4.5% for trophy Class A office in Westside submarkets to 9%+ for distressed Class B/C office in secondary corridors. The market is repricing around higher cost of capital — not collapsing — with industrial, grocery-anchored retail, and constrained multifamily maintaining investor demand while legacy office faces structural headwinds. Here are the current cap rates across property types and submarkets, sourced from CBRE, Cushman & Wakefield, and Colliers Q1 2026 data.
Los Angeles Cap Rates by Property Type — Q1 2026
The following cap rate ranges reflect stabilized, income-producing assets transacting in the Los Angeles metro in Q1 2026. Distressed or value-add transactions are excluded — those trade at implied yields materially above these ranges.
| Property Type | Class A Cap Rate | Class B/C Cap Rate | Key Driver |
|---|---|---|---|
| **Office** | 4.0–5.5% | 8.0–10%+ | Westside trophy vs. CBD commodity |
| **Industrial** | 5.8–6.5% | 6.5–7.5% | Last-mile demand, Inland Empire spillover |
| **Multifamily** | 5.0–6.0% | 6.0–7.5% | Rent control exposure, vintage, location |
| **Retail (grocery-anchored)** | 5.8–6.5% | — | Anchored by Ralphs, Whole Foods, Trader Joe's |
| **Retail (strip/unanchored)** | 7.0–8.5% | 8.5–10%+ | Bifurcated by corridor and anchor quality |
| **Self-Storage** | 5.5–6.5% | 6.5–7.5% | Constrained supply in infill LA markets |
| **Net Lease (NNN)** | 5.0–6.5% | 6.5–8.0% | Credit quality of tenant drives pricing |
Sources: CBRE 2026 US Real Estate Outlook (LA section); Cushman & Wakefield Greater LA MarketBeat Q1 2026; Colliers LA Industrial Market Report Q1 2026.
LA Office Cap Rates by Submarket — 2026
Los Angeles office is among the most submarket-bifurcated markets in the country. Cap rates vary by 300–500 basis points depending on location, vintage, and leasing health.
**Premium Westside Submarkets (Class A, 4.0–5.5%)**
- **Century City** — The dominant Class A office submarket in LA. Anchor buildings (2000 Avenue of the Stars, 1875 Century Park East) with strong tenancy trade at sub-5% cap rates. CBRE Q1 2026 shows Century City as the only LA submarket with positive net absorption.
- **Santa Monica** — Technology and media tenants (NBCUniversal, Snap, Yahoo) underpin demand. Cap rates: 4.5–5.5% for well-leased product.
- **Culver City / Silicon Beach** — Post-pandemic streaming industry contraction has moderated demand, but quality product still trades at 5.0–6.0%.
- **Beverly Hills** — Boutique office with prestige premium; low supply and luxury retail adjacency. 4.5–5.5% cap rates on boutique assets.
**Mid-Market Submarkets (Class A/B, 6.0–8.0%)**
- **El Segundo / South Bay** — Aerospace and defense tenancy (Raytheon, SpaceX suppliers) provides stable demand. Cap rates: 6.0–7.5%.
- **Burbank / Studio City** — Entertainment production adjacency; mid-6% for stabilized assets.
- **Glendale / Pasadena** — Value-oriented suburban; 6.5–8.0% for Class A, higher for B.
**Distressed Submarkets (Class B/C, 8.0–12%+)**
- **Downtown LA (CBD)** — Highest vacancy in the metro (25%+ in CBD). Distressed office conversions and trophy writedowns. Implied cap rates on transactions: 8–12%+ for most product; some transactions pricing at land value implying 12–15%.
- **Mid-Wilshire** — Elevated vacancy, older vintage product. 8.5–10%+ for most trades.
- **Warner Center / Woodland Hills** — Suburban obsolescence risk. Class B trades at 8–9%.
Cushman & Wakefield Q1 2026 Greater LA Office Report characterizes the CBD as undergoing "structural reset" — not distressed selloff — but acknowledges that trophy and Westside Class A are capturing nearly all net absorption while everything else softens.
Los Angeles Industrial Cap Rates — 2026
Industrial remains the strongest-performing LA asset class by investor demand. The LA–Inland Empire industrial corridor is the largest industrial market in the US by square footage, and even with moderating absorption, vacancy remains below long-run averages.
**LA County Infill Industrial (5.8–6.3%)**
- Last-mile distribution, fulfillment, and cold storage in Vernon, City of Commerce, Compton, Carson
- Constrained supply (no developable land) keeps cap rates compressed despite moderating rent growth
- Ceiling height premium: 32ft+ clear height assets trade 50–75 bps tighter than legacy low-clearance
**South Bay Industrial (5.9–6.4%)**
- Port of Los Angeles / Long Beach adjacency for import logistics
- Strong sovereign and institutional buyer demand
- Class A distribution: 5.9–6.2%; Class B: 6.5–7.0%
**Inland Empire West (6.0–6.5%)**
- Ontario, Fontana, Rancho Cucamonga
- Largest spec development pipeline; vacancy expanding from historic lows
- Net absorption decelerated in Q1 2026 (CBRE data); rent growth has flatlined
**Inland Empire East (6.2–7.0%)**
- San Bernardino, Redlands, Perris
- Higher cap rates reflect greater distance from port and lower infill premium
- Speculative oversupply most pronounced here; some assets pricing wider
**2026 Industrial Trend**: Colliers Q1 2026 reports LA–IE industrial absorption of 8.2M sq ft in Q1 2026, down from the 15M+ quarterly pace of 2021–2022. Vacancy is rising but from a historic low of 1.2% — it remains below 5% in most LA County submarkets, supporting stable-to-slightly-expanding cap rates rather than significant repricing.
Los Angeles Multifamily Cap Rates — 2026
Multifamily cap rates in Los Angeles are uniquely shaped by rent control law — the single biggest underwriting variable not captured in headline cap rate ranges.
**Rent Control Exposure Drives Cap Rate Bifurcation**
California AB 1482 (signed 2019) caps annual rent increases on most residential units at 5% + CPI for buildings 15+ years old. Additionally, LA City and County have local rent stabilization ordinances (RSO) covering units built before 1978. The practical effect:
| Asset Type | Cap Rate Range | Rent Control Status |
|---|---|---|
| **Post-2020 construction (no RSO)** | 4.8–5.5% | Uncontrolled — AB 1482 only |
| **2005–2019 vintage** | 5.2–6.0% | AB 1482 only (5%+CPI cap) |
| **Pre-1995 vintage (newer RSO)** | 5.5–6.5% | AB 1482 + potential local RSO |
| **Pre-1978 vintage (full RSO)** | 6.0–7.5% | LA RSO caps at 3–8% depending on classification |
**Submarket Breakdown**
- **Westside (Santa Monica, Brentwood, Venice, Culver City)**: 4.8–5.5% for post-2015 Class A. High demand, constrained supply, tech/entertainment renter base.
- **Mid-City / Silver Lake / Echo Park**: 5.5–6.5% for mixed vintage. High RSO exposure suppresses buyer pool.
- **Downtown LA (DTLA)**: 5.8–6.5% for newer high-rise. Downtown absorption has improved with office-to-residential conversions.
- **San Fernando Valley (Sherman Oaks, Encino)**: 5.5–6.5% for Class B/C garden product. Strong renter demand, moderate RSO exposure.
- **South Bay (Torrance, Long Beach, Inglewood)**: 5.8–6.8% for Class B. Growing demand from aerospace/port workers.
**2026 Market Note**: Cushman & Wakefield Q1 2026 reports LA multifamily fundamentals remain structurally sound — housing supply constraints mean renter demand far exceeds new supply. The cap rate challenge is financing-side: higher debt service costs have widened the buyer-seller expectation gap. Deals closing in Q1 2026 are equity-heavy or include seller financing.
How to Use LA Cap Rates in Underwriting — Key Variables
Headline cap rate is the starting point, not the end point. LA-specific variables that materially affect underwriting:
**1. Rent Control Verification**
Before modeling rent growth on any multifamily asset, verify: (a) construction date vs. 1978 RSO threshold, (b) current RSO classification and annual allowable increase, (c) pending Costa-Hawkins legislation status. Unverified rent control exposure has caused significant underwriting errors in LA multifamily deals.
**2. Office: Weighted Average Lease Term (WALT)**
In a market where replacement tenant attraction costs $80–$150/sq ft in TI, the difference between a 7-year WALT and a 2-year WALT is material. LA office underwriting must stress: current vacancy assumption, TI/LC on rollover, and realistic rental rate assumptions (Class A Westside vs. everything else).
**3. Industrial: Last-Mile vs. Distribution**
LA County last-mile assets (sub-100,000 sq ft, urban infill) carry structurally different demand profiles than Inland Empire mega-distribution (500,000 sq ft+). Last-mile premium: 75–150 bps cap rate compression vs. comparable secondary industrial.
**4. Exit Cap Rate Expansion**
With 10-year Treasury at 4.6% (Q1 2026), the historical spread between cap rates and risk-free rates is compressed. Underwrite a 50–100 bps cap rate expansion at exit (5–7 year hold) on all LA deals. Sensitivity: at $10M purchase price, 75 bps exit expansion = $500,000–$800,000 reduction in exit proceeds.
**5. Insurance Cost Escalation**
LA property insurance costs have increased 30–50% since 2022 due to wildfire exposure (confirmed in both CBRE and Cushman & Wakefield 2026 reports). NOI projections must model current insurance quotes, not historical costs. This is particularly material for hillside multifamily and properties in Ventura/Santa Barbara adjacency zones.
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