Conditions improve as supply growth slows for the Inland Empire multifamily market

Inland Empire multifamily market overview

The Inland Empire multifamily market is beginning to show signs of rebounding following a recent supply cycle. Rents have recovered from a modest decline in 2025, reaching a new high during the second quarter. Vacancy moved lower in recent months as absorption began to offset new deliveries. The Class A segment of the market continues to be impacted by the cumulative impact of supply growth during the past few years. Since the beginning of 2023, developers have delivered approximately 12,000 new units to the market, and in that time the Class A vacancy rate has increased by more than 200 basis points. In contrast, Class B and Class C properties have faced far less competition and vacancies in the lower tiers have averaged around 4%. Class A rents posted a healthy increase during the second quarter, a potential signal that the competitive pressures from new construction are beginning to ease.

Per-unit sales prices moved lower in the first half of this year as Class B properties accounted for a larger share of transactions after Class A assets represented the majority of sales in 2025. While transaction activity has increased modestly, the market has yet to record a sale exceeding $100 million through the first half of 2026. By comparison, at least one transaction of that size occurred annually from 2020 through 2025. Investors appear to be favoring assets that have been less exposed to recent supply pressures, while newly delivered Class A communities continue to work through lease-up. Cap rates reflect the evolving mix of transactions, with stabilized Class A assets generally trading in the high-4% to low-5% range and value-add opportunities closer to 6.0% and above.

Looking ahead for the Inland Empire

Multifamily deliveries are expected to slow from 2024 and 2025 levels through the remainder of this year and into 2027, allowing for stabilizing market conditions in the Inland Empire. After a period of elevated deliveries in prior years, the pace of new development is slowing and the remaining units under construction are generally concentrated in a handful of high-demand submarkets, easing supply-side pressure across much of the region. These conditions should result in a more balanced operating environment. Recent rent gains suggest this transition is already underway. Additional rent gains are expected and could be impacted by the pace of lease-up in areas such as the Greater Ontario/Rancho Cucamonga corridor.

The investment outlook for the Inland Empire is showing early signs of improving. Class B properties, which accounted for most transaction activity during the first half of 2026, are expected to remain a target for investors given the segment’s relative affordability and stable operating performance. Investors may want to see a few more periods of improved performance among Class A properties before newer assets begin to trade at higher volumes. Longer term, investors will respond favorably to a clearer outlook surrounding the region’s logistics and distribution industries, which have traditionally supported persistent renter demand.

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