Los Angeles Commercial Real Estate Cap Rates by Property Type — 2025/2026
Los Angeles commercial real estate cap rates vary by 300–500 basis points depending on property type, submarket, vintage, and asset-specific characteristics. A trophy Class A office building in Century City and a Class B/C office building in Downtown LA are both "office" — and they trade at 4.5% and 9%+ respectively. Understanding the property-type and submarket specifics is essential for accurate valuation. Here is a complete breakdown of LA cap rates by property type, with submarket-level data and the key variables that drive divergence within each category.
Office Cap Rates by LA Submarket (2026)
Office is the most submarket-stratified asset class in Los Angeles. The spread between a stabilized Westside trophy and a distressed CBD Class B asset is 500+ basis points — a range wider than the difference between most other asset classes.
**Class A Office — Top Performing LA Submarkets**
| Submarket | Cap Rate Range | Market Notes |
|---|---|---|
| **Century City** | 4.0–5.0% | Only LA submarket with positive Q1 2026 net absorption |
| **Santa Monica** | 4.5–5.5% | Tech/media tenants; Snap, Yahoo, NBCUniversal |
| **Culver City** | 5.0–6.0% | Streaming contraction moderated demand; still premium |
| **Beverly Hills** | 4.5–5.5% | Boutique prestige; constrained supply |
| **El Segundo / South Bay** | 6.0–7.0% | Aerospace/defense anchored; stable demand |
| **Burbank / Media District** | 6.0–7.5% | Entertainment adjacency; studio production |
**Class B/C Office — Distressed Submarkets**
| Submarket | Cap Rate Range | Vacancy |
|---|---|---|
| **Downtown LA (CBD)** | 8.5–12%+ | 25%+ vacancy; distressed conversions |
| **Mid-Wilshire** | 8.0–10% | Aging vintage; limited tenant demand |
| **Warner Center** | 7.5–9.0% | Suburban obsolescence; hybrid work impact |
| **Glendale / Pasadena** | 7.0–8.5% | Class A: 7–8%; Class B: 8–9% |
Cushman & Wakefield Q1 2026 characterizes LA CBD office as undergoing "structural reset" — the Westside bifurcation from the rest of the market is a medium-term, not cyclical, phenomenon. The flight-to-quality trend shows no sign of reversing.
**What office buyers need to know for LA in 2026**: Tenant improvement costs for replacement tenants in Class A Westside space are running $120–$200/sq ft. In Class B CBD space, TI costs are $80–$140/sq ft with lower certainty of attracting credit tenants. This makes office underwriting highly sensitive to current WALT — assets with 7+ year weighted average lease terms trade at material premiums over assets with 2–3 year rollover exposure.
Industrial Cap Rates by LA Corridor (2026)
Los Angeles industrial is America's largest market by total inventory and among its most competitive for investor demand. Cap rates vary meaningfully by specific submarket and asset specification.
**LA Industrial Cap Rates by Corridor**
| Corridor | Cap Rate | Key Tenants / Use Cases |
|---|---|---|
| **LA County Infill (Vernon, City of Commerce, Compton)** | 5.8–6.2% | Last-mile, food distribution, cold storage |
| **South Bay / Harbor (Carson, Torrance, Rancho Dominguez)** | 5.9–6.4% | Port adjacency, import logistics, 3PL |
| **San Gabriel Valley (City of Industry, Pomona)** | 6.0–6.5% | Manufacturing, distribution, e-commerce |
| **Inland Empire West (Ontario, Fontana, Rancho Cucamonga)** | 6.0–6.5% | Mega-distribution, e-commerce fulfillment |
| **Inland Empire East (San Bernardino, Redlands, Perris)** | 6.3–7.0% | Spec logistics, secondary distribution |
| **San Fernando Valley (Chatsworth, Van Nuys, Sun Valley)** | 6.2–6.8% | Light industrial, manufacturing, showrooms |
**Asset Specification Impact on Cap Rate**
| Spec Variable | Cap Rate Impact |
|---|---|
| 36ft+ clear height vs. 24ft | -50 to -100 bps |
| 1:10K dock-door ratio vs. 1:20K | -30 to -60 bps |
| ESFR sprinklers vs. older fire suppression | -20 to -40 bps |
| Cross-dock vs. front-load configuration | -20 to -50 bps |
| 2,000+ amp electrical service | -15 to -30 bps |
**2026 Trend**: Colliers Q1 2026 reports LA–IE total industrial vacancy rising to 4.8% from a historic low of 1.2% in 2022. This is still below the long-run average of 6–8%, indicating healthy fundamentals despite moderation. Rent growth has decelerated from 30%+ during peak (2021–2022) to approximately 0–2% currently. Cap rates have expanded modestly (15–25 bps) from compressed 2022 lows of 4.5–5.0%, now stabilized at 5.8–6.5%.
Multifamily Cap Rates by Submarket and Rent Control Status (2026)
Multifamily underwriting in Los Angeles is fundamentally different from any other market in the US due to the layered rent control regime. Understanding the legal status of any specific asset before applying cap rate benchmarks is essential.
**The LA Rent Control Stack (2026)**
1. **City of LA RSO (pre-1978 buildings)**: Caps annual rent at 3–8% depending on classification; stricter just-cause eviction requirements; affects most apartment buildings built before February 1, 1979
2. **California AB 1482 (statewide, 2020+)**: Applies to buildings 15+ years old not covered by a stricter local RSO; caps annual rent at 5% + local CPI (typically 7.5–9% max)
3. **No control**: Post-2020 construction, condominiums, single-family rentals (with exceptions)
**Multifamily Cap Rates by Vintage and Legal Status**
| Asset Category | Cap Rate | Annual Rent Increase Cap | Notes |
|---|---|---|---|
| **Post-2020 construction (no RSO)** | 4.8–5.5% | Market rate (no cap) | Strongest buyer demand |
| **2005–2019 vintage** | 5.2–6.0% | AB 1482: 5%+CPI | Moderate control exposure |
| **1980–2004 vintage** | 5.5–6.5% | AB 1482: 5%+CPI | Depends on LA City vs. County location |
| **Pre-1978 (LA City RSO)** | 6.0–7.5% | RSO: 3–8% | Most restricted; smallest buyer pool |
**Submarket Cap Rates for Multifamily**
| Submarket | Cap Rate Range | Key Characteristics |
|---|---|---|
| **Westside (SM, Venice, Brentwood)** | 4.8–5.5% | Post-2015 Class A; tech renter base |
| **Silver Lake / Echo Park / Los Feliz** | 5.5–6.5% | Mixed vintage; high RSO exposure |
| **Downtown LA (DTLA)** | 5.5–6.5% | New high-rise Class A; conversion supply |
| **Hollywood / Mid-Wilshire** | 5.8–6.5% | Mixed vintage; RSO prevalent |
| **San Fernando Valley** | 5.5–6.5% | Garden apartments; strong demand |
| **South Bay (Long Beach, Torrance)** | 5.8–7.0% | Class B/C; aerospace/port renter base |
| **Inglewood / Hawthorne** | 6.0–7.5% | SoFi Stadium demand uplift; mixed vintage |
**2026 Multifamily Market Note**: Cushman & Wakefield Q1 2026 reports LA multifamily fundamentals remain structurally sound due to housing supply constraints. The "expectation gap" between buyers and sellers has narrowed as both sides accept the higher-rate environment as the new baseline. Deals closing in Q1 2026 are equity-heavy or include seller carry; all-cash buyers are active in the $2M–$15M range.
Retail Cap Rates by Format and Location (LA 2026)
LA retail in 2026 is bifurcated — grocery-anchored and high-street retail at one end, unanchored secondary-corridor strip at the other. National retail vacancy (4.1% per CoStar Q4 2025) is the lowest since 2007, but LA has its own submarket dynamics.
**LA Retail Cap Rates by Format (2026)**
| Format | Cap Rate | Key Drivers |
|---|---|---|
| **Grocery-Anchored (Whole Foods, Ralphs, Trader Joe's)** | 5.8–6.5% | Essential retail; strong anchor credit |
| **High-Street Retail (Melrose, 3rd Street Promenade, Abbot Kinney)** | 5.5–6.5% | Tourism + local demand; limited supply |
| **Drug-Anchored (CVS, Walgreens)** | 6.5–7.5% | Credit concerns as chains close underperforming units |
| **Power Center / Big Box** | 7.5–9.0% | Anchor-dependent; conversion/redevelopment risk |
| **Unanchored Strip (suburban corridors)** | 7.5–9.5%+ | Vacancy risk; lower-credit tenants |
| **QSR / Drive-Thru Net Lease** | 5.0–6.5% | Operator and brand quality dependent |
| **Pad / Freestanding NNN** | 5.5–7.0% | 10+ year terms: tighter; shorter terms: wider |
**LA Retail Submarket Notes**
- **Third Street Promenade (Santa Monica)**: Post-COVID recovery ongoing but not complete. Street retail vacancy remains above 2019 levels. 6.0–7.5% for stabilized inline space.
- **Beverly Hills (Rodeo Drive adjacency)**: Luxury retail performing; low vacancy. 5.0–6.5% for well-located product.
- **Melrose Avenue**: High-street independent retail. Mixed-use adjacency. 6.0–7.0% for stabilized assets.
- **Suburban strip (San Fernando Valley, South Bay corridors)**: Unanchored, older vintage. 7.5–9.5%. Many assets facing functional obsolescence.
**The Grocery Anchor Premium**: Grocery-anchored LA retail trades 150–250 bps tighter than comparable unanchored strip because grocery creates weekly traffic that supports the non-anchor tenants (nail salon, cleaners, dentist, juice bar). Loss of anchor is a transformative credit event — well-underwritten grocery-anchored deals should include analysis of anchor lease expiration date and co-tenancy clauses.
Cap Rate Summary: How LA Compares Nationally by Property Type
How do LA cap rates compare to national benchmarks across property types?
| Property Type | LA Class A | National Average | LA vs. National |
|---|---|---|---|
| **Industrial (infill)** | 5.8–6.3% | 5.9% | Tight vs. national — infill premium |
| **Multifamily (post-2015)** | 4.8–5.5% | 5.4% | Tighter — supply constraint, demand depth |
| **Office (Westside Class A)** | 4.0–5.5% | 7.2% | Much tighter — submarket quality premium |
| **Office (Class B/C)** | 8.0–12%+ | 8.8% | Wider — CBD distress is acute |
| **Retail (grocery-anchored)** | 5.8–6.5% | 6.4% | Slightly tighter — LA grocery demand |
| **Self-Storage** | 5.5–6.5% | 6.0% | In-line — constrained infill supply |
**Bottom Line**: LA commands a premium (lower cap rates) for high-quality industrial, constrained multifamily, and Westside trophy office — asset classes where supply constraints and deep institutional demand compress yields. LA trades at a discount (higher cap rates) for distressed CBD office and secondary-corridor retail — reflecting structural vacancy problems that are more acute here than the national average.
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