2026 Q3/Q4 Los Angeles Multifamily Update

1st Half 2026: Units Delivered in Core Submarkets

One of the biggest differences between Los Angeles submarkets today is the amount of new rental supply being delivered. While Hollywood and Koreatown continue to see significant new construction, several other highly desirable submarkets have experienced very little new supply.

*Unit deliveries came from Costar. Certain projects may be missing from their database.

The disparity is significant. Hollywood alone delivered more than 1,100 units during the first half of 2026, while Sherman Oaks / Studio City had no deliveries.

1st Half 2026 Transaction Volume

Transaction volume remains relatively limited throughout Los Angeles, although activity varies significantly by submarket.

Total transactions across these submarkets: 190 buildings.

Comparison to H1 2025: 176 buildings, an 8% increase.

Average 1st Half 2026 Cap Rates

Cap rates continue to vary substantially based on location, vintage, condition and upside potential.

LA multifamily average cap rate one year ago: 5.5%.

The spread between submarkets has become increasingly meaningful. Koreatown / Mid-Wilshire, for example, averaged a 6.7% cap rate compared with approximately 5.0% in West LA. Investors willing to take on more near-term supply and operational risk are being compensated with higher going in yields.

Which Submarkets Would I Invest in Today?

As both a broker and investor, I tend to take a contrarian view.

Some of the submarkets with the highest levels of new construction and slower absorption may actually offer some of the more interesting acquisition opportunities today.

There is no secret that Koreatown and Hollywood are among the most heavily developed multifamily submarkets in Los Angeles right now. Investors have already responded to that additional supply by pushing cap rates higher, particularly for older 1920s to 1940s product.

Rather than avoiding these markets entirely, I think there is an opportunity to acquire well located properties at historically attractive going in cap rates.

New construction will eventually slow as projects become more difficult to finance and the existing supply is absorbed. Investors buying quality assets at higher cap rates in 2026 and 2027 could benefit from strong current cash flow while positioning themselves for appreciation when cap rates eventually compress.

Current vacancy in Hollywood: 7%

Current vacancy in Koreatown: 5.8%

These will be important numbers to watch to determine how quickly the existing supply is being absorbed.

What Am I Looking Forward To?

Opportunity Zones 2.0

Opportunity Zones 2.0 could create a new source of buyer and development demand throughout certain pockets of Los Angeles.

The preliminary locations include several popular investment and development submarkets, including West Adams, Northeast LA, North Hollywood and the South Bay.

What makes the timing particularly interesting is the significant amount of appreciated stock market wealth created over the past several years, particularly in AI related companies. Investors realizing large capital gains may look toward Opportunity Zone investments as one potential way to redeploy those gains.

From the past decade of brokering transactions in Opportunity Zones, I have seen firsthand how the designation can attract development capital into targeted neighborhoods. A new round of Opportunity Zones could help drive additional housing development and transaction volume.

Certain ADU and infill projects located within newly designated Opportunity Zones may also create investment opportunities, depending on the final rules and project structure, although I expect the majority of Opportunity Zone real estate investment to remain focused on ground up development.

As a general recap, an investor realizing a capital gain from another asset may be able to defer that gain by making a qualifying investment through an Opportunity Zone vehicle. If the new qualifying Opportunity Zone investment is held for 10+ years, appreciation on the new investment may potentially receive favorable federal capital gains treatment.

Where Is the Distress Everyone Has Been Waiting For?

Over the past year, there have been approximately 10 lender owned multifamily sales in Los Angeles.

Despite investors continuing to search for distressed opportunities, very few are actually coming through traditional REO sales.

Instead, we are increasingly seeing another type of distress: owners selling properties close to their outstanding loan balances and walking away with little of their original equity.

In my opinion, this is where many of today's distressed opportunities are occurring rather than through widespread bank foreclosures.

The 2026/2027 Loan Reset

2026 and 2027 are major years for multifamily loan resets in Los Angeles.

Just within our current listing inventory, nearly half of our active listings have an upcoming or recent interest rate reset as one of the factors contributing to the owner's decision to sell.

Properties that generated attractive cash flow with debt in the 3% range can quickly move toward breakeven or negative cash flow when that debt resets in the 6% range.

Owners then have a difficult decision: allow their loan to float at a substantially higher rate and potentially contribute additional cash to the property, refinance under today's tighter lending standards, or sell and redeploy the remaining equity into an investment producing better current cash flow.

In my opinion, this is one of the biggest acquisition opportunities for multifamily buyers in 2026 and 2027.

If the 10 Year Treasury Hits 5% Again, Are Values Going to Drop?

The 10 year Treasury is one of the primary benchmarks affecting multifamily financing and investor return expectations.

The 10 year is currently in approximately the 4.7% range, compared with 4.24% one year ago.

In October 2023, the 10 year Treasury briefly crossed 5%, reaching its highest level in more than a decade.

Lenders continue to compete aggressively for multifamily loans and lending spreads have been tightening, which is positive for property values. However, a meaningful increase in Treasury yields would still put additional pressure on borrowing costs.

A move toward a 5% 10 year Treasury could potentially push many multifamily borrowing rates into approximately the 6.5% to 6.75% range, depending on the lender, leverage and property.

The larger risk to multifamily values may not simply be another 50 to 60 basis points in borrowing costs.

The bigger issue is opportunity cost.

As yields increase across Treasuries, private credit and other investments, investors have more opportunities to generate meaningful income without taking on the operational and regulatory risks associated with owning Los Angeles apartments.

That competition for investor capital could become increasingly important to multifamily valuations if Treasury yields remain elevated.

Looking Ahead

My expectation is the remaining of this year and next year will continue to create opportunities for buyers willing to look beyond headline distress.

I do not expect Los Angeles to suddenly experience a massive wave of bank owned apartment buildings. Instead, I expect more owners facing loan resets, rising expenses, deferred maintenance and limited cash flow to make the decision to sell voluntarily.

At the same time, the significant reset in cap rates means buyers can acquire Los Angeles apartments today at going in yields that were extremely difficult to find for much of the prior decade.

The combination of higher cap rates, motivated sellers, loan resets and eventually declining new construction starts could make the next several years an attractive acquisition period for long term Los Angeles multifamily investors.

Tuvia Group 2026 YTD Closings: 19 buildings sold | 132 existing units + 39 development units