Finance  ·  Sales

L.A.’s Multifamily Market Slammed the Brakes in 2023

City’s added transfer tax and higher borrowing costs dragged on investment demand while a wave in construction drove up vacancies


The rate and volume of multifamily investment in Los Angeles County decelerated throughout 2023 while a wave of new projects reached the finish line and drove up vacancy, a new report shows.

Rising interest rates and inflation were the main causes of the tightening landscape, NAI Capital reported Tuesday. Vacancy ticked up for the seventh quarter in a row due to an influx of new multifamily construction that is reshaping the L.A. market. 

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The number of units sold in the fourth quarter of 2023 rebounded from the previous quarter, but the year-over-year number of units sold dropped 46 percent compared to 2022. The average cap rate increased by 60 basis points from last year, and the average sales price per unit dropped 23 percent. Specifically, 20,740 units sold in 2023 for almost $5.69 billion, or $284,485 per unit, for a 58 percent drop in sales dollar volume from 2022.

“Investors are grappling with a price disparity with sellers due to rising interest rates, tight credit and softening market conditions,” the report read.

Additionally, Measure ULA in the city of Los Angeles added more pressure on sellers starting in April 2023 by adding a new property transfer tax on real estate sales over $5 million. The sales volume of these buildings saw a staggering 67 percent annual decrease in 2023. The number of deals for those assets were down by 52 percent from the previous year, and even 14 percent below the levels in 2020 during the pandemic shutdown.

In contrast, the sales volume for apartment buildings under the $5 million threshold in the city of Los Angeles increased by 5.7 percent from 2022, with the number of deals up by 10 percent year-over-year. 

“This trend reflects the overall market conditions, where sellers with assets over $5 million are more often unwilling to sell,” NAI Capital’s report read. “In a backdrop of a soft rental market, new taxes and elevated interest rates, the market is expected to moderate. As credit conditions tighten, the multifamily market is adapting to increased borrowing costs, substantial inflation, a less robust growth outlook, and heightened financial risks.”

The rate of empty units in L.A. County increased just 60 basis points compared to the previous year, reaching 4.9 percent at the end of the fourth quarter, while project completions saw a remarkable annual increase of 34.6 percent. There are more than 1.2 million rentable units in L.A. County, with another 31,632 under construction, according to the report. The rise in new housing units also weakened average monthly rent, which decreased by $10 from the previous quarter to $2,169 per unit. 

Gregory Cornfield can be reached at