February 13, 2026

New construction in the Inland Empire multifamily market poised to slow in 2026

Q4 2025

Overview

The Inland Empire multifamily market recorded softer operating fundamentals in 2025 as elevated construction activity and light employment gains impacted rent and vacancy trends. Over the past three years, developers have delivered more than 10,800 new units. In 2025 alone, there were projects totaling over 3,900 units completed, marking the third consecutive year of heightened delivery totals. This construction has intensified competition for renters among Class A communities. Despite a solid full year absorption total of 3,100 net move-ins, the number of new units coming to market outpaced demand, driving the vacancy rate up 90 basis points annually to 5.3%. The rise in vacancies dragged on rents, with the average asking rent dipping below $2,000 per month for the first time in nearly two years during the fourth quarter.

Multifamily investment activity remained modest during the closing months of the year. Transaction counts have remained fairly stable in each of the past three years, with current activity levels down approximately 50% from the 2022 peak. While activity levels have declined, pricing has remained firm, supported by Class A transactions in higher-income areas such as Rancho Cucamonga. Stabilized properties have generally been selling at cap rates within the high-4% to low-5% range, while lower-tier and value-add properties have been trading at cap rates closer to 6%. The region continues to attract long-term capital interest due to strong household formation, demographic resilience, and relative affordability.

Looking ahead

The Inland Empire enters 2026 positioned for gradual improvement as the supply cycle shows early signs of cooling and demand fundamentals stabilize. Completions are expected to slow meaningfully, with approximately 2,500 units forecast for delivery in 2026, well below the average annual pace recorded from 2023 to 2025. This deceleration should give the market a window of opportunity to absorb newly delivered Class A inventory more effectively, limiting further vacancy expansion and enhancing rent growth. While vacancy is projected to rise a modest 20 basis points to 5.5%, the slowing of supply pressure, combined with anticipated employment gains should help establish a more balanced operating environment. Rent trends are expected to shift back into positive territory, with average rents forecast to inch higher in 2026.

Investors are benefitting from lower borrowing costs, trending toward a more transaction-friendly lending environment. If the trend continues, investment activity and multifamily transaction volume could see a bit of an increase in the coming periods. Healthy long-term fundamentals and improving certainty around interest-rate movements may pull prospective buyers off the sidelines. Investors will continue to focus on high-growth submarkets, with SW Riverside County, Rancho Cucamonga, and select pockets of Riverside and San Bernardino leading performance, while value-add strategies may re-emerge in submarkets with predominantly Class B and Class C inventory as rent growth improves. Overall, 2026 is shaping up to be a potentially transitional year, one where moderating supply and evolving economic conditions help reposition the market for healthier long-term growth.