South Bay Multifamily Market Report — Q3 2026: What Higher Rates Mean for Redondo Beach, Torrance and the Beach Cities

The third quarter of 2026 changed the math for apartment owners in Redondo Beach, Torrance and the rest of the South Bay. Borrowing costs went up sharply between July and the end of September. Rents and vacancy barely moved. This report is about that gap and what to do about it.

A note on the numbers first. The big brokerage research reports for the third quarter are not out yet, so the market-wide figures below are the latest public ones, from the second quarter. The interest rate figures are current through October 1. Every source is listed at the bottom. Where I'm giving you my own read, I say so.

The Q3 headline for the South Bay: rates went up, fast

Three numbers tell the story.

Mortgage rates. Freddie Mac's weekly survey had the 30-year fixed rate at 6.43% on July 2. By September 24 it was 7.03%, and on October 1 it was 7.28%. A year ago it was 6.34%.

The Fed. On September 16 the Federal Reserve raised its target rate by a quarter point, to a range of 3.75% to 4.00%. It was the first increase since July 2023. Most Fed officials projected one more increase before the end of the year.

The 10-year Treasury. It was yielding 5.26% on September 29.

Which number matters to you depends on what you own. If you own a duplex, triplex or fourplex, your buyer usually gets a residential loan, and the Freddie Mac figure is the benchmark. Investor loans price above it. If you own five units or more, your buyer gets a commercial apartment loan, and those generally follow Treasury yields.

Either way, the loan your buyer was quoted in June is not the loan they are quoted today.

What higher rates do to a Redondo Beach or Torrance apartment sale

Your building's income did not change in September. The cost of borrowing against it did.

On five units and up, lenders size the loan to the building's income. When the rate goes up, the same income supports a smaller loan. The buyer has to make up the difference with more cash or a lower price. There is no third option.

This does not hit every building the same way. Here is my read.

It hits hardest where the buyer depends on the loan. That is the larger building bought mainly for its income, the kind you see more often in Torrance.

It hits less where the buyer brings more cash. A fourplex near the sand in Hermosa Beach or Manhattan Beach is often bought by an owner-user or a 1031 exchange buyer, and the price leans on the land and the location as much as the rent roll.

Redondo Beach sits in between. Buildings close to the water trade more like the Beach Cities. Buildings farther inland trade more on the numbers.

What the public data says about Los Angeles and the South Bay

Matthews Real Estate published its second-quarter Los Angeles multifamily report on August 11. It put metro vacancy at 4.52% and average effective rent at $2,887, up 0.8% from a year earlier. Cap rates had risen for six straight quarters to 5.37%. The average price per unit was $308,551, which is 13.9% below the 2022 peak.

Buyers were still active. The same report counted $2.56 billion in second-quarter sales, up 39.3% from the same quarter a year before.

Kidder Mathews measures the market differently and gets different numbers for the same quarter: 5.5% vacancy, a 5.8% average cap rate and $280,591 per unit. The two firms agree on the direction. Rents are close to flat and cap rates have been drifting up.

For the South Bay specifically, Matthews had vacancy at 3.5%, the second-tightest submarket in the metro. It also showed the South Bay with the highest share of apartments under construction, at 3.9% of existing inventory. The report does not break that down by city, and its South Bay is drawn wider than the Beach Cities.

Keep in mind all of that was measured before the September rate jump. A 5.37% average cap rate with the 10-year Treasury at 5.26% leaves very little room. My read is that the third- and fourth-quarter reports will show cap rates moving up again. That is an opinion, not a published figure.

What I sold in Redondo Beach this year

I only quote sales I handled myself.

I have closed three Redondo Beach apartment sales so far in 2026, all fourplexes: 2214 Clark Lane at $2,270,000, 2013 Ruhland Avenue at $2,120,000, and 702 S. Pacific Coast Highway at $1,860,000. That is $6.25 million for 12 units, or about $521,000 per unit.

For context, my 47 closed Redondo Beach apartment sales since 2015 cover 306 units and $163.5 million. They average $534,541 per unit.

Compare that to the metro average of roughly $309,000 per unit. Redondo Beach is not the Los Angeles average. A metro report tells you the direction of the market. It does not tell you what your building is worth.

I don't have verified closed-sale data to publish for Torrance, Manhattan Beach, Hermosa Beach or El Segundo this quarter, so I'm not going to guess at it here. If you own in one of those cities, call me and I'll pull the actual comparable sales for your street.

Rent control in Redondo Beach, Torrance and the Beach Cities did not change

Redondo Beach, Torrance, Manhattan Beach, Hermosa Beach and El Segundo have no local rent control ordinance. Most apartment buildings 15 years or older fall under the state law, AB 1482. It caps annual increases at 5% plus the local change in CPI, and never more than 10%.

The CPI part resets every August 1. Confirm the current allowable figure before you send a rent increase notice.

Here is why it matters this quarter. With market rents close to flat, the upside in most South Bay buildings is the gap between what your tenants pay and what the unit would rent for today. AB 1482 controls how fast a buyer can close that gap with the tenants in place. Buyers price that in, and with higher loan costs they price it more carefully.

What a South Bay apartment owner should do now

If you plan to sell in the next 12 months, here is my advice.

Price off today's loan quotes, not last spring's sales. A sale that closed in April was financed at April's rates.

Know who your buyer is. Cash buyers and 1031 exchange buyers are less sensitive to rates than a buyer who needs a large loan. How the building is marketed should match the likely buyer.

Don't count on the Fed to rescue pricing. It just raised rates and signaled it may do it again. I can't tell you where rates go from here, and neither can anyone else.

If you plan to hold, tight vacancy is on your side. You don't have to do anything.

If you are selling to exchange into another property, the 45-day and 180-day deadlines don't move because rates did. Talk to your CPA before you list. I'm a broker, not a CPA or an attorney — get your own advice.

What is your South Bay building worth right now?

A market report is an average. Your building is not.

I've represented more than $1 billion in transactions across my career, including 47 closed apartment sales in Redondo Beach. I'll give you a free, confidential opinion of value built from your rent roll, actual South Bay sales and today's lending terms. No obligation.

Related: What Is My Torrance Apartment Building Worth? A 2026 Valuation Guide

Call or text me at 310.593.9861.

Luca Jacoli — Shield Commercial Real Estate
South Bay Multifamily Real Estate Broker
310.593.9861

Sources: Freddie Mac Primary Mortgage Market Survey, October 1, 2026, September 24, 2026 and July 2, 2026. Federal Reserve FOMC statement, September 16, 2026. Fed officials' rate projections, as reported by Chase. 10-year Treasury yield, Federal Reserve Bank of St. Louis (FRED). Matthews, Los Angeles Multifamily Market Report Q2 2026. Kidder Mathews, Los Angeles Multifamily Market Report Q2 2026. Redondo Beach sales are from my own closed transactions.