Southern California Commercial Cap Rates by City, Q3 2026: What Buildings Actually Sold At

By Bobak Kalhor, President, K2 Investment, Inc. — CA DRE #01198998 · Corporate DRE #01201662 — Published October 2026 · 12 minute read

As of the third quarter of 2026, commercial buildings across Southern California are worth less per dollar of income than they were in 2022, in every market and every property type: the published cap rates have moved up by roughly half a point to a point and a half over those four years. Over the last twelve months the picture has split: office cap rates came back down in every market (Downtown Los Angeles, where we work, is the exception and is still rising), while retail, industrial and apartment rates held or edged higher. Under the headlines, two things are true that the averages do not show: in the year to September 2026, small apartment buildings in Los Angeles sold at noticeably higher cap rates than the published figures, and small office buildings sold at lower ones.

This article starts where we work, Downtown Los Angeles, and runs the same numbers across Southern California: current cap rates for office, retail, industrial and apartment buildings in Los Angeles, Orange County, the Inland Empire, Ventura and San Diego, by county and by city. Downtown is our base and our proof; the reach is the state. The published series runs year by year from 2022, the last year before borrowing costs rose, so that you can see where the move started; the sold-at figures come from 9,335 closed sales in the two years from October 2024 to September 2026, which is as far back as a sold-at median is current enough to be useful. If you already know what a cap rate is, skip to the tables. If you do not, the next section takes two minutes and makes the rest of the article make sense.

What is a cap rate, and why does it matter?

A cap rate, short for capitalization rate, is the annual net income a building produces divided by its price. A building that nets $100,000 a year and sells for $2,000,000 sold at a 5 percent cap rate. It is the commercial real estate equivalent of a yield: the return a buyer gets in the first year, before any loan, if they paid all cash.

Where cap rates stand in 2026

Chart 2 shows the published rate for each market, year by year at the third quarter, from 2022 to 2026. We start in 2022 because it is the last reading before borrowing costs rose; everything after it is the repricing. Every line climbs from 2022, and the move is the same story in every panel: buildings are cheaper for their income than they were four years ago. Office moved the most and fastest, and the apartment and industrial sectors that were priced tightest in 2022 moved almost as far. Most of the move happened in 2023 and 2024; 2025 and 2026 are flatter.

Two things in the chart are worth a second look. Office has turned. The published office rate peaked in 2024 in Orange County, the Inland Empire and Ventura and in 2025 in Los Angeles and San Diego, and in the twelve months to the third quarter of 2026 it came down in every one of the five markets, as it did nationally, even though office vacancy in Los Angeles and San Diego is still in the mid-teens. And the sectors that were supposed to be safe are still repricing. Retail, industrial and apartment rates held or rose again in the twelve months to Q3 2026 in every market, by up to a quarter of a point, and came down nowhere, with no sign in the series of a floor.

Downtown Los Angeles, our own market, is the first panel in Chart 2 and the one exception to the office story. The published Downtown office rate has risen every year: 6.4 percent at Q3 2022, 7.2 in 2023, 8.0 in 2024, 8.3 in 2025 and 8.6 at Q3 2026, with office vacancy near 24 percent, and unlike every metro in the chart it has not turned. Downtown retail went from 5.3 to 6.3 percent over the same four years and Downtown apartments from 3.7 to 4.9. That is a Downtown office building losing roughly a quarter of its value for the same income since 2022, which is exactly why Downtown owners should look at closed sales and not the headline. The September Downtown market report has the building-level detail.

What buildings actually sold at

Chart 3 is the scoreboard. For every closed sale of $1 million and up and 5,000 square feet and up between October 2025 and September 2026, we took the cap rate recorded on the transaction and found the median by county. Each county gets two bars for each property type: a grey bar for the published rate at Q3 2026 and an orange bar for what buildings actually sold at over those twelve months. The difference in length is the gap. Where fewer than eight sales carried a cap rate we say so rather than show a number. The exact figures and the number of sales behind each one are in the table beneath the chart.

Where the two measures agree, they agree closely: in the twelve months to September 2026, Los Angeles industrial, Orange County retail and Riverside County retail all sold within a tenth of a point of their published rates. Where they disagree, the disagreement runs in a consistent direction by property type. Apartment buildings sold wider than the published rate in every county. Office sold tighter than the published rate wherever there were enough sales to say. The two sections after the city table take each of those apart, because they are the findings an owner can act on.

Cap rates by city

Most people do not own a building in a metro; they own one in Santa Ana, or Riverside, or Oxnard. Chart 4 is the city view for commercial property: the fifteen cities with enough closed sales carrying a cap rate to publish a median, sorted from tightest to widest. Each city gets one figure, the median of every qualifying sale that closed there between October 1, 2024 and September 30, 2026. We pool the two years because no single city has enough reported cap rates in one year to publish a reliable annual figure; the year-by-year view is in Chart 2 for the published series and Chart 5 for apartment sales. The table that follows has the full list of 36 cities, including those with too few reported sales to publish a sold-at figure, with the published rate at Q3 2026 for the submarket most of each city’s sales sit in, split by property type, so that no row is blank. San Diego County is in the metro tables above and left out here; it is not a market we work.

All 36 cities: closed sales, what sold, and the published submarket rates

A few of the rows answer questions we are asked most often. On closed sales from October 2024 to September 2026, Riverside sold at about 6.5 percent and San Bernardino at about 6.75, a full point wide of Santa Ana for the same kinds of buildings, which is the Inland Empire discount in one number. Anaheim is at 6 percent, Santa Ana a touch under. Oxnard and Aliso Viejo have had plenty of sales but few with a recorded cap rate, so they carry published rates only. The sale counts matter: a median of eight sales is a median of eight sales, and the published rates describe a submarket rather than a city line, so a city that straddles two submarkets, as Long Beach and Ontario do, is shown against the one where most of its sales landed.

Apartment buildings in Los Angeles

This is the question the data answers best, because apartment sales are the one sector where most transactions carry a recorded cap rate, about seven in ten, against one in ten or fewer for office and industrial. Chart 5 shows Los Angeles County by submarket, year over year; the table after it carries the figures, the change and the published rate for each submarket.

The county median moved from about 5.4 percent in the year to September 2025 to about 5.8 percent in the year to September 2026, on roughly a thousand reported sales each year. Of the 22 submarkets with enough sales to compare, 18 moved higher, three were flat and one, the beach cities, tightened slightly. The larger moves were in Pasadena, Inglewood, East Hollywood, the South Bay and Glendale, each up half a point or more. The published rate for the county at Q3 2026 is 5.2 percent. The buildings that actually traded in the year to September 2026 closed about 60 basis points above it, and on a $3 million building that difference is roughly $300,000 of price.

Los Angeles apartment cap rates by submarket, year 1 to year 2

The reason for the gap is the same reason the published number is useful for something else. The modeled rate describes the whole inventory, weighted toward large, newer, institutionally held properties. The sold-at rate describes the 8 to 60 unit buildings that make up most of what actually changes hands. If you own one of those and someone tells you the market is at 5.2, the last twelve months of closings say otherwise.

Why the two numbers disagree, and which one to use

With office, the gap runs the other way, and for the same reason in reverse. The published office rate in Los Angeles at Q3 2026 is 7.5 percent, and in the most distressed submarkets it is above 8. The office buildings that actually closed between October 2025 and September 2026 at $1 million and up, with a median price of about $5 million, sold at around 6.2 percent. Those are not the towers. They are owner-user buildings, medical office and small professional buildings, and the model is right about the towers while the sales are right about the buildings. If you are buying a 15,000 square foot office building for your own firm, the headline rate does not describe your competition; the sold-at rate does.

Industrial is the sector where the two measures disagree in opposite directions in different markets. In the twelve months to September 2026, Riverside County industrial sold almost a point wider than the published rate; San Diego industrial sold almost a point tighter. Both samples are small, so we would not build a thesis on either. But a buyer in the Inland Empire quoting the published rate as the market, and a seller in San Diego doing the same, would each be about 80 basis points away from what the last year of closings shows.

The practical rule: use the published rate to understand the direction of a market, and the sold-at rate to understand the price of a building like yours. Ask which one you are being quoted. A broker’s opinion of value, a lender’s underwriting and a buyer’s offer may each be built on a different one.

What this means if you own a building

If you own apartments in Los Angeles, the market has moved more than the headlines say. An owner who last looked at value in 2024 is probably carrying a cap rate that is half a point stale as of September 2026, and that is before Measure ULA, which takes 4 or 5.5 percent of the gross above $5.4 million inside the City of Los Angeles.

If you are an owner-user buying office, the headline overstates the discount. The buildings you compete for traded about a point tighter than the published rate in the year to September 2026. Underwriting to the headline will lose the building.

Insurance is in these numbers. Part of what moved cap rates on older and Downtown stock between 2024 and 2026 is the premium line, which we covered in the insurance piece. A cap rate on a building whose premium has doubled is a different cap rate from one on a building with a grandfathered policy, and no table can see the difference. The rent roll and the declarations page can.

We work Downtown Los Angeles block by block, and have for thirty years; it is why we can tell you what an older concrete building on Santee Street is worth, and why Downtown is the first panel in every chart above. Downtown is our proof, not our perimeter. These charts are the same discipline applied to the rest of Southern California, and the same discipline we bring to a building anywhere in the state.

Send us your address

If you own commercial property or an apartment building anywhere in California and want to know where it sits against the last twelve months of closed sales in its own submarket, send us the address and the rent roll. The six counties in this article are where the data is, not where we stop; we have worked listings from Santee Street to Napa. We will place the building on this table, with the sold-at and the published rate side by side, and send back the answer.

If you are looking to buy, whether a first investment property, a 1031 exchange replacement, a building for your own business or a larger portfolio, and you want a second opinion on what a cap rate should be before you make an offer, send us the listing or the offering memorandum. We will tell you where that price sits against what comparable buildings actually sold for in that submarket in the last twelve months, what the published rate says, and which of the two to believe for that building. Thirty years of buying and selling in Downtown Los Angeles is the experience behind the answer. No newsletter, no drip sequence, one reply from a person.

Bobak Kalhor, K2 Investment, Inc.  |  (213) 624-0490  |  bk@k2investments.com
530 E. 8th Street, Suite 400, Los Angeles, CA 90014  |  DRE #01198998  |  Corp. DRE #01201662

Related: Downtown LA commercial real estate market report, September 2026  |  Why commercial buildings in Los Angeles are getting harder to insure  |  Measure ULA in 2026: what sellers actually pay  |  Current Downtown Los Angeles listings