Second Quarter 2025
Inland Empire Multifamily Market Sees Rising Sales Volume as Development Slows in 2025
Vacancy edges higher, rents plateau, and investors adjust to pricing shifts as new supply and economic pressures reshape market conditions.
The Inland Empire added more than 2,100 new units in the first half of 2025, lifting vacancy to 5.9%. Despite softer rent growth and a 13% drop in pricing year-over-year, sales volume climbed 33% as investors pursued value opportunities.
MARKET OVERVIEW
The Inland Empire’s multifamily market has expanded over the past year, fueled by population in-migration and relative housing affordability. According to the California Department of Finance, Riverside and San Bernardino counties grew by 0.2% and 0.3%, respectively, between 2024 and 2025, bringing the region’s population to more than 4.7 million. This growth spurred construction, with 2,195 new units delivered in the first half of 2025, a 40.6% increase from the same period in 2024.
The vacancy rate in Q2 held steady from the prior quarter but rose 60 basis points year-over-year to 5.9%. Newly completed units added supply-side pressure, tempering rent growth. Asking rents inched up 0.1% quarter-over-quarter and 0.9% year-over-year, reaching a record $2,124 per unit.
Development slowed as of Q2, with 5,320 units under construction, down 9.4% from the prior quarter and 39.2% from Q2 2024. Elevated interest rates, rising construction costs, and softer rent growth continue to weigh on new projects.
Investor activity, however, accelerated in the first half of 2025. The number of units sold rose 22.3% year-over-year to 1,672, with a 15.5% quarterly gain after a sluggish Q1. The average price per unit declined to $227,832, down 6.9% from the prior quarter and 13.0% year-over-year, but total sales volume climbed 33.4%. The average cap rate held steady at 5.4% year-over-year, reflecting continued price adjustments in response to tighter credit and higher borrowing costs.
TRENDS TO WATCH
The market remains in transition entering the second half of 2025, shaped by shifting demographics, affordability, and investor sentiment. According to the California Employment Development Department, the Riverside-San Bernardino-Ontario MSA unemployment rate rose to 6.4% in July 2025, up from 6.0% in June and above the 5.8% rate a year earlier.
Housing affordability continues to attract households from neighboring counties. Average rents in the Inland Empire remain 21.3% below Orange County’s $2,698 average, and only 6.2% below Los Angeles County’s $2,265, reinforcing the region’s appeal for cost-conscious renters.
While affordability supports long-term demand, high inflation has slowed leasing at newer, higher-priced properties. Many renters are remaining in older stock, contributing to elevated vacancy in new deliveries. Over the past two years, 11,288 units have come online, with Q2 vacancy in newly built properties at 34.2%.
Inflationary pressures persist. The U.S. Bureau of Labor Statistics reported in July that housing costs in Riverside-San Bernardino-Ontario rose 3.5% year-over-year. Offsetting this, motor fuel prices declined 5.0% and the overall energy index fell 1.8%, lowering commuting costs into Los Angeles and Orange County.
Slower renter demand for higher-priced units, combined with concessions, is reshaping investor strategies. While elevated borrowing and operating costs continue to push sale prices lower, total transaction volume is on the rise, signaling a market in transition as investors adapt to evolving conditions in the second half of 2025.
