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Southern California Commercial Real Estate Cap Rates: 2025 Outlook Across Industrial, Office, Retail, and Multifamily

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Cap Rates in Southern California Enter Q4 2025

Southern California commercial real estate (CRE) cap rates are shifting in Q4 2025, reflecting higher interest rates, tenant demand changes, and regional differences across asset classes.

From Los Angeles industrial hubs to Orange County retail corridors and Inland Empire workforce housing, investor strategies are evolving. According to CBRE’s Greater Los Angeles 2025 Market Outlook, even a 50-basis-point change in cap rates can swing valuations by millions.

This article reviews the Q4 2025 CRE cap rate outlook across Southern California’s industrial, office, retail, and multifamily markets with insights from CBRE, Cushman & Wakefield, JLL, Colliers, Matthews, CREXi, and public data sources like the Federal Reserve, BLS, and U.S. Census.

📊 Cap Rates Snapshot: Q4 2025

CRE Asset ClassLos AngelesOrange CountySan DiegoInland EmpireSources
Industrial~5.0%~5.2%~5.3%~5.6%CBRE Outlook, CREXi
Office~6.4%~6.7%~6.0% (life sciences)~6.8%Cushman & Wakefield, JLL
Retail~5.7%5%–6% deals~6.0%~6.1%Matthews, Colliers
Multifamily4.3–4.7%~4.9%~5.0%~5.3%CBRE Multifamily Outlook

📈 Year-over-Year Cap Rate Changes: Q4 2024 → Q4 2025

SectorQ4 2024 AvgQ4 2025 AvgYoY ChangeSource
Industrial (IE)5.3%5.6%+30 bpsCBRE
Office (LA)5.8%6.4%+60 bpsCushman & Wakefield
Retail (OC)5.6%~5.8%+20 bpsMatthews
Multifamily (LA)4.3%4.5%+20 bpsCBRE

🏭 Industrial: Still the Strongest Performer

  • CBRE reports Inland Empire industrial cap rates at ~5.6%, up 30 bps YoY.
  • CREXi shows LA industrial trading tighter at ~5.0%.

Investor Takeaways:

  • South Bay & IE logistics hubs remain premium markets.
  • Vacancy is inching up but remains below U.S. averages.
  • E-commerce and trade will continue to drive demand.

🏢 Office: Diverging Markets

  • Cushman & Wakefield reports LA CBD office cap rates widened to ~6.4% in Q4 2025.
  • JLL shows San Diego’s life sciences market holding stable at ~6.0%.
  • Suburban Orange County averages ~6.7%.

Investor Takeaways:

  • Downtown LA towers are under the most pricing pressure.
  • Life sciences and medical offices remain stable performers.
  • Hybrid work continues to shift demand toward flexible layouts.

🛍 Retail: Steady Through Q4 2025

  • Matthews shows Orange County retail deals closing in the 5%–6% range, with Class A centers trading tighter.
  • Colliers reports Los Angeles retail stability at ~5.7%.

Investor Takeaways:

  • Essential retail (grocery, QSR, pharmacy) remains resilient.
  • Lifestyle centers in affluent submarkets are outperforming.
  • Older Class C strip centers face rising vacancies.

🏘 Multifamily: Competitive but Yielding Outward

  • CBRE Multifamily Outlook places LA Class A multifamily at 4.3–4.7% in Q4 2025.
  • Inland Empire multifamily averages ~5.3%, appealing to investors seeking yield.

Investor Takeaways:

  • Inland Empire & North OC remain attractive for higher returns.
  • Workforce housing is gaining traction.
  • Rent stabilization keeps LA competitive but constrained.

📊 Macro Drivers of Cap Rates in Q4 2025

  • Interest Rates:Federal Reserve policy has kept borrowing costs elevated, widening yields.
  • Employment Trends:Bureau of Labor Statistics data shows job growth in LA and San Diego, especially in tech and biotech.
  • Population Growth:U.S. Census data highlights ongoing migration into the Inland Empire, fueling multifamily and industrial demand.

❓ FAQs: Southern California Cap Rates Q4 2025

Q1: What are industrial cap rates in the Inland Empire as of Q4 2025?
👉 About 5.6%, per CBRE.

Q2: Which sector has the lowest cap rates?
👉 Multifamily in Los Angeles, averaging 4.3–4.7%.

Q3: Where are yields highest in Q4 2025?
👉 Inland Empire industrial (~5.6%) and multifamily (~5.3%).

Q4: How did cap rates shift YoY?
👉 Industrial +30 bps, Office +60 bps, Retail +20 bps, Multifamily +20 bps.

Q5: How are interest rates affecting valuations?
👉 Elevated borrowing costs continue to push yields higher (Federal Reserve).

Q6: What role does employment play in CRE?
👉 Job growth supports demand for office and multifamily (BLS).

Q7: Is retail still attractive in 2025?
👉 Yes — especially grocery-anchored and QSR deals (Matthews).

Q8: Which office markets are resilient?
👉 San Diego life sciences, trading steady near ~6.0% (JLL).

Q9: When will official Q4 2025 reports be published?
👉 Major brokerages like CBRE, Cushman, JLL, and Colliers will release full year-end surveys in early 2026.

Partner with KEYZ Commercial

As Q4 2025 closes, industrial and multifamily remain the strongest performers, while office and Class C retail continue to face headwinds.

At KEYZ Commercial, we help clients seize opportunities with local expertise, off-market deals, and trusted advisory services across Los Angeles, Orange County, San Diego, and the Inland Empire.

📞 Ready to invest in Southern California CRE?


👉 Contact KEYZ Commercial today for tailored investment strategies and opportunities.

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