Santa Monica Multifamily Appreciation Over the Last Five Years

This analysis examines multifamily property appreciation in Santa Monica from January 1, 2020 through the end of 2025, using closed sales data across two distinct segments:

2 to 4 unit properties
5 unit and larger apartment buildings

These two categories behave very differently. Understanding the distinction is critical for accurate valuation and realistic expectations.

What Drives Appreciation in Santa Monica Multifamily Real Estate?

The appreciation trend is driven by:

Scarcity of land and strict zoning, which limits new supply and makes existing multifamily buildings more valuable.
Replacement cost inflation — construction costs have risen sharply, making existing buildings more valuable relative to new builds.
Strong rental demand and low vacancies — Santa Monica’s proximity to jobs, beaches, and transit keeps demand stable.
Premium pricing per square foot — recent multifamily sales frequently exceed $550–$900/SF, with trophy properties exceeding $1,000/SF.

These structural factors support long-term appreciation even when short-term rent growth is muted under rent control.

Are rents rising in Santa Monica? and Does rent growth drive multifamily value?

The rental environment in Santa Monica has remained relatively stable, with rents increasing modestly month over month over the past year. However, because Santa Monica has strong rent control protections, rent increases do not always translate directly into higher property valuations. Instead, land value, zoning constraints, and the scarcity of multifamily units play a more significant role in long-term price appreciation.

Multifamily rents in Santa Monica have grown at an average rate of approximately 3 percent annually over the past five years.
Rent-controlled properties have generally increased in the 2 to 3 % range, reflecting CPI-linked caps, while newer market-rate buildings have experienced stronger rent growth, typically closer to 4 to 6 % annually.
When blended across the full 5-unit-and-up multifamily inventory, overall rent growth has averaged near 3 percent per year.

How Much Have Multifamily Properties Appreciated in Santa Monica Since 2020

One of the questions is how much Santa Monica multifamily has appreciated over the last five years.

The short answer is that Santa Monica multifamily has experienced steady, durable appreciation rather than sharp volatility. Pricing increased across both small and large multifamily segments, even as interest rates rose and transaction volume slowed.

The longer answer depends on unit count, buyer profile, and how properties are underwritten.

Conservative Appreciation Outlook in Santa Monica, Multifamily

Based on historical behavior:

• Baseline appreciation: ~3% annually
• Stronger assets / better locations: ~4%–6% annually over long holds
• Additional upside possible through vacancy, re-tenanting, or improvements

Downside risk has historically been limited by supply constraints and replacement cost pressures.

• Properties that 4 and 5 years ago traded around $1.6M–$2.2M are now commonly $2.6M–$3.5M
• 10–16 unit assets that once traded in the low $3M range are now often $4M–$5M+
• This appreciation occurred despite higher interest rates and slower transaction volume and Measure GS

What is the Price Per Square Foot for 5 Unit and Larger Properties

Price Per Square Foot
• Earlier-cycle trades clustered around $375–$475 per SF
• Recent 5+ unit sales commonly fall between $550–$900+ per SF
• Prime micro-locations exceed $1,000 per SF

What is Avarage cap rate for 5 units, and more in Santa Monica

• Cap rates typically in the 3.5%–5.0% range
• GRMs often between 14–20+

This reflects a long-term appreciation and inflation-hedge strategy, not a short-term cash-flow play.

What Is the Real Cap Rate Range for 2 to 4 Unit Properties in Santa Monica

When cap rates are calculated and used, the observed range from 2020 through 2025 typically falls between:
Low 2 % range for prime, owner-user-driven purchases
Mid 3 % range for stabilized properties
Occasionally low 4 % range when income is unusually strong or pricing is conservative

However, many transactions closed with cap rates that would be considered unacceptable in traditional multifamily markets. These properties still sold quickly and at strong prices.

This confirms that buyers are not pricing risk through cap rate expansion in this segment.

GRM Analysis for 2 to 4 Unit Properties in Santa Monica

Another pressing question buyers ask is whether gross rent multipliers are stretched in Santa Monica.

The answer is yes, and intentionally so.

From 2020 through 2025, GRMs for 2–4 unit properties frequently ranged from the mid-teens into the 20s, with some transactions exceeding that range when income was suppressed or owner occupancy was a factor.

High GRMs did not prevent transactions from closing. In many cases, buyers ignored GRM entirely.

What Was the Percentage Appreciation for 2–4 Unit Properties in Santa Monica Over the Last Five Years

Based on the sold data in the last 5 years, 2–4 unit properties in Santa Monica appreciated approximately 25 percent to 40 percent cumulatively from 2020 through the end of 2025, depending on location, condition, and buyer profile.

That translates to roughly 4.5 percent to 7 percent annualized, with the strongest performance occurring in prime residential corridors.

Multifamily appreciation in Santa Monica has not been uniform. Location within the city has played a decisive role in both price per square foot and long-term appreciation.

Pico Neighborhood and Lincoln Corridor Areas

These areas include properties closer to Pico Boulevard, Lincoln Boulevard, and other higher-traffic corridors. Buildings are typically older, more rent-controlled, and more investor-driven from a cash-flow perspective.

In 2020, multifamily properties in these locations generally traded between $650 and $800 per square foot.

By 2025, pricing has increased to approximately $780 to $950 per square foot.

This represents an overall appreciation of roughly 20 to 30 percent over five years, equating to an average annual appreciation rate of approximately 3.5 to 5 percent.

Price growth in these areas has been steady but moderated by rent control, lower rent elasticity, and heavier exposure to capped income growth.

North of Montana, Ocean Park Near the Beach, Downtown Core, and Wilshire Corridor

These locations represent the more walkable, lifestyle-driven parts of Santa Monica, with stronger long-term tenant demand and scarcer 5+ unit inventory.

In 2020, multifamily properties in these areas typically traded between $950 and $1,200 per square foot.

By 2025, pricing has increased to approximately $1,200 to $1,550 per square foot.

This reflects an appreciation of roughly 30 to 45 percent over five years, translating to an average annual appreciation rate of approximately 5.5 to 7.5 percent.

These areas recovered faster after the pandemic and continued to outperform due to location scarcity, tenant stability, and stronger buyer competition at resale.

Why 2 to 4 Unit Properties Appreciate Differently Than Larger Multifamily

2 to 4 unit properties consistently attracted owner-users, residential buyers, and investors competing with people planning to live on site. This expanded demand supported pricing even when rental income alone did not justify valuations.

As a result, appreciation in this segment was often driven by lifestyle appeal, lot value, and neighborhood comparables rather than cap rates.

Are 2 to 4 Unit Properties in Santa Monica Priced Like Houses

Often yes, but tenancy matters significantly.

Duplexes in Santa Monica are generally priced closer to single-family homes when at least one unit can be owner-occupied. However, if the other unit is occupied by a long-term, rent-controlled tenant paying well below market, pricing shifts meaningfully. Buyers will discount the property to reflect limited income, restricted flexibility, and the long-term impact of rent control on future value.

For three- and four-unit properties, income plays a larger role overall. Properties with multiple long-term, below-market tenants typically trade at lower price-per-square-foot and higher GRMs than comparable buildings with vacancy or higher in-place rents.

In short, owner-user appeal drives pricing, but below-market rent and rent control materially affect value, even for duplexes.

Did Multifamily Prices Decline When Interest Rates Increased

Based on closed sales through the end of 2025, Santa Monica multifamily pricing did not experience broad market declines. Instead, the market became more selective.

Well-located properties held value
Inferior locations or deferred maintenance faced longer marketing times
Small multifamily benefited from owner-user demand
Large multifamily benefited from land scarcity and institutional confidence

This selective behavior is consistent with an appreciation-driven market rather than a speculative one.

2 to 4 Units Versus 5 Unit and Larger Properties

From 2020 through 2025, both segments performed well, but for different reasons.

2 to 4 unit properties often showed faster percentage appreciation driven by residential demand and owner-user competition.

5 unit and larger properties showed steadier appreciation driven by land value, replacement cost, and long-term investor demand.

Both segments reinforced Santa Monica’s position as a capital preservation market rather than a yield-driven one.

Why Rent Control Slows Income Growth but Not Asset Appreciation in Santa Monica

While Santa Monica’s rent control framework limits near-term rent increases, it has not prevented long-term price appreciation. Buyers underwrite these assets based on land scarcity, replacement cost, and long-hold inflation protection rather than short-term income acceleration.

Santa Monica Multifamily Appreciation Summary 2020 Through 2025

Over the last five years, Santa Monica multifamily real estate demonstrated:

Consistent appreciation across market cycles
Higher price per square foot over time
Resilience during rising interest rate environments
Different appreciation drivers by unit count

For owners, this confirms the strength of long-term holds.
For buyers, it explains why pricing remains competitive despite modest income yields.

How This Santa Monica Multifamily Analysis Was Compiled: This analysis is based on closed sales data for multifamily properties in Santa Monica from January 1, 2020 through December 31, 2025. The data includes arms-length transactions across 2–4 unit properties and 5 unit and larger apartment buildings. Metrics reviewed include price per square foot, sale price, unit count, vacancy, rent levels, cap rates, and gross rent multipliers. Figures are presented as observed market ranges rather than precise averages to reflect the way Santa Monica multifamily actually trades.

Bottom Line

If you own a 2–4 unit property or apartment building in Santa Monica and are considering selling or refinancing, understanding how buyers actually underwrite these assets is critical. Every property is valued differently based on unit count, tenant profile, location, and rent control exposure. A confidential, property-specific valuation based on real closed sales can clarify realistic pricing, timing, and the most effective path forward.