If you've been trying to buy a multifamily asset on the Westside in the last six months, you already know the story. It's tight out there. Q4 2024 brought meaningful cap rate compression across Santa Monica, Brentwood, West LA, and Mar Vista, driven largely by 1031 exchange buyers chasing a shrinking pool of quality inventory.
Let's dig into the numbers and talk about what they actually mean for your next acquisition or disposition.
Cap Rates Tightened 15 to 25 Basis Points
The headline number is straightforward: cap rates compressed 15 to 25 basis points across Westside multifamily submarkets during Q4 2024. That's not a massive swing in isolation, but it continues a trend that started mid year and shows no signs of reversing.
According to CBRE's Q1 2025 multifamily report, Class B apartment buildings in the greater Los Angeles market are now trading at an average cap rate of 4.92%. Class C product sits at 5.38%, and Class A assets have compressed to 4.74%. Marcus and Millichap's latest research confirms the trend, showing an additional 7 basis points of compression in Q1 2025 alone.
On the Westside specifically, we're seeing even tighter numbers. A well maintained 10 to 20 unit building in Santa Monica or Brentwood is trading sub 4.5% if it has any rent upside at all. West LA proper is slightly wider, generally in the 4.6% to 5.0% range depending on unit mix and condition. Mar Vista remains the relative value play, with cap rates still clearing 5% on occasion for C class product.
What's Driving Compression
Three forces converged in Q4 to push pricing higher and cap rates lower.
1031 exchange demand. This is the big one. Sellers from other markets and asset classes are flooding into Westside multifamily as their preferred landing zone. The perceived stability of rent controlled apartments in high barrier to entry neighborhoods continues to attract capital from investors exiting retail, office, and even industrial positions. When you've got more exchange buyers than available product, pricing moves in one direction.
Improved lending conditions. While rates haven't dropped dramatically, lenders loosened underwriting standards slightly in Q4. We saw several community banks and credit unions get more aggressive on 5 to 15 unit deals, and a handful of life insurance companies returned to the market for larger stabilized assets. That incremental liquidity matters.
Cash buyers. Perhaps the most underreported trend is the volume of all cash acquisitions. We tracked multiple closings in Santa Monica and Brentwood where buyers paid cash at or above asking, then placed permanent debt post close. These buyers aren't interest rate sensitive. They're capital placement driven, and they're setting comps that make the rest of the market look cheap by comparison.
Sales Volume Up 12%
Total multifamily transaction volume on the Westside improved approximately 12% quarter over quarter in Q4 2024. That's a welcome recovery from the doldrums of mid 2023 through early 2024, though we're still well below the 2021 and 2022 peaks.
The volume increase came almost entirely from the two factors mentioned above: easier lending and cash buyers stepping in. Notably, the average days on market for well priced listings dropped from roughly 90 days in Q2 to about 55 days in Q4. Properties that hit the market correctly priced with clean financials are moving. Overpriced listings are still sitting, but the gap between realistic and aspirational pricing has narrowed considerably.
Rents: Flat Now, Growth Ahead
Here's where the story gets nuanced. Effective rents across the Westside were essentially flat through Q4 2024 and into Q1 2025. Concessions haven't returned in a meaningful way, but landlords aren't pushing rents aggressively either. The market is in a holding pattern.
Looking forward, Yardi Matrix projects 2.4% rent growth for Class A and B product in the greater Westside market through the end of 2025, with Class C assets expected to see a more modest 1.7% increase. Those numbers matter for underwriting, but they aren't going to dramatically change your cash on cash returns in the near term.
The Cash on Cash Reality
Let's talk about the elephant in the room. If you're buying a Westside apartment building today at a 4.75% to 5.0% cap rate and putting 35% to 40% down, your levered cash on cash return is likely coming in below 4%. In many cases, well below.
Run the numbers on a typical $5 million acquisition in West LA at a 4.85% cap. With 37% down and a 6.5% loan rate on a 30 year amortization, you're looking at roughly $242,000 in NOI against approximately $165,000 in annual debt service. That leaves about $77,000 in pre tax cash flow on $1.85 million in equity. That's a 4.16% cash on cash return before reserves, and we haven't accounted for any capital expenditures.
Does that pencil? It depends entirely on your investment thesis. If you're buying for long term appreciation and rent growth in a supply constrained market, these returns are acceptable. If you need current yield, the Westside is a tough place to find it right now.
Submarket Breakdown
Santa Monica
The tightest market on the Westside. Average price per unit has climbed to approximately $415,000 for stabilized product. Cap rates on marketed deals are consistently in the 4.25% to 4.60% range. The combination of strong tenant demand, Tier 1 location appeal, and extremely limited new supply keeps a floor under pricing. Rent control dynamics under the Santa Monica Rent Control Board add a layer of complexity that many out of area buyers underestimate.
Brentwood
Similar pricing dynamics to Santa Monica but with slightly less rent control friction since most product falls under LA RSO rather than a separate municipal ordinance. We're seeing strong demand for 8 to 16 unit buildings in the $4 million to $8 million range. Cap rates generally mirror Santa Monica at 4.3% to 4.7%.
West LA
The broadest submarket in our coverage area, with pricing that varies significantly by micro location. Assets closer to Wilshire and the commercial corridors trade at $340,000 to $380,000 per unit, while properties in the more residential pockets near Brentwood command premiums. Cap rates range from 4.5% to 5.1%, offering slightly more yield than the premium submarkets to the north and west.
Mar Vista
Still the value play on the Westside, with average pricing around $330,000 per unit and cap rates that occasionally breach 5.25%. The neighborhood continues to benefit from demographic shifts, restaurant and retail development along Venice Boulevard, and proximity to Silicon Beach employment centers. We think Mar Vista offers the best risk adjusted returns on the Westside today, and we'll have a deeper dive on this submarket coming soon.
What to Watch in 2025
Three things will determine where Westside cap rates go from here. First, interest rates. The Fed's path matters, but local lending conditions matter more for the 5 to 50 unit product that dominates this market. Second, 1031 exchange volume. If sellers in other asset classes continue to seek shelter in Westside apartments, expect continued compression. Third, the mid 2026 debt maturity wall. A significant volume of floating rate and bridge debt originated in 2021 and 2022 will come due over the next 18 months. That could create selling pressure and buying opportunities, particularly for well capitalized investors.
We'll continue tracking these trends and reporting what we see on the ground. If you're evaluating a specific acquisition or considering a disposition, reach out. The data tells part of the story, but the real insight comes from knowing what's trading, what's not, and why.
