Inland Empire Multifamily Market Report

Market Overview – Inland Empire Multifamily

An increase in rents over the past two years has drained affordability from the Inland Empire and demand has recently softened. Multifamily fundamentals have not been in sync with the broader economy, as the labor market remains robust and payrolls are growing by more than twice the rate of population growth.

Construction activity is at record levels and the largest developments are in the Greater Ontario/Rancho Cucamonga submarket, which has the best proximity to job nodes and is also undergoing an industrial boom. Developers are also targeting Southwest Riverside County/Temecula, which draws much of its migration from renters priced out of San Diego County.

Highlights

• Over the past year, the vacancy rate in The Inland Empire is up from 2.8% a year ago to 4.9%.
• Overall sales volume totaled $1.9 billion in 2022.
• Rents have increased by 2.2%, compared with the 10-year average of 5.8% per year in the last 12 months.
• The Inland Empire has below-average cap rates at 4.2% compared to the nation.

The average rent for apartments in Inland Empire is between $1,667 and $2,247.

Rents | Vacancy | Construction

The Inland Empire continues to have strong population growth as renters seek relief from more expensive urban areas. The median home price in the market is over $550,000. With a 20 percent down payment at current mortgage rates, homebuyers can expect to pay roughly $3,600/month, including taxes and fees. A significant amount of deliveries are expected through much of 2023, putting additional upward pressure on the vacancy rate. Recent rents are demonstrating a market that is still resilient, with rents increasing by 2.2 percent. The biggest shift in the market has been among high-end properties, which are attractive to families relocating from more expensive California markets. Rents for class A apartments have decreased by -0.3 percent year over year to $2,520 per unit. The bulk of large (over 200 units) apartment construction has been concentrated in the Greater Ontario/Rancho Cucamonga submarket, where housing offers the best proximity to office jobs.

Sales

Sales volume totaled $1.9 billion in 2022, compared to $1.1 billion in 2021. Investors have been attracted to stabilized investments in recent months. One example, Metro Thirty-Six Ten in Riverside was acquired by Green Storm Investment in August for $102 million ($335,500/unit) after 10 percent of its units had been renovated by the seller. Another recent deal motivated by stabilized income is Citrine Hills in Ontario, which sold for $310 million ($422,000/unit) in May and was 98.4 percent leased at the time of sale. Inland Empire has below-average cap rates at 4.2 percent; however, cap rates have historically been higher than in neighboring coastal markets where investors expect steadier fundamentals and liquidity.