Santa Monica has emerged as the second most expensive rental market in the Los Angeles metropolitan area, with one-bedroom apartments commanding a median rent of $2,900, according to the latest Zumper Los Angeles Metro Area Report.
Only Beverly Hills surpassed Santa Monica in rental costs, with one-bedrooms priced at $3,010. The city outpaced third-place Irvine, where one-bedroom units rent for $2,790, highlighting the premium tenants pay for Santa Monica's coveted location.
The rental market's strength contrasts sharply with a cooling residential sales market. While apartment rents have climbed approximately 3% year-over-year and vacancy rates have plummeted to just 4.4% — translating to 95-96% occupancy — home sales tell a different story.
The median home sale price in Santa Monica dropped 4% year-over-year to around $1.6 million as of mid-2025. In June, approximately 52 homes sold compared to 60 sales in June 2024, representing a 13% decline in transaction volume.
"The robust rent growth and low vacancy underscore Santa Monica's desirability, but also the ongoing housing shortage," according to market analysis, as few new multifamily projects have opened recently to relieve pressure on the rental market.
The divergent trends reflect broader economic pressures affecting different segments of Santa Monica's real estate landscape. Higher interest rates and a shift in the mix of homes sold, with fewer ultra-high-end transactions, have contributed to the residential sales slowdown.
Meanwhile, the commercial real estate sector presents a tale of stark contrasts. The office market continues to struggle with vacancy rates hitting 30-31% by late 2024 and remaining at those elevated levels into 2025 — among the highest in Southern California. Class A asking rents have softened to approximately $55-60 per square foot annually as landlords offer generous concession packages to attract tenants.
The retail sector faces similar headwinds, with citywide availability reaching 15.7% in the second quarter of 2025 — the highest level in a decade. Notable casualties include closures of national chains such as Rite Aid, H&M and REI, adding more than 100,000 square feet of vacant space to the market over the past year.
However, the industrial and flex property sector remains a bright spot. Industrial vacancies on the Westside hover around 4.5-5%, with practically full occupancy in Santa Monica proper due to strong demand for last-mile distribution, creative studios and life science laboratories.
The rental market's resilience stems partly from regulatory factors. Santa Monica's rent control ordinance limits annual increases to 2.3% for controlled units, with a hard cap of $60 for high-rent properties. While this constrains revenue growth for landlords of older buildings, properties exempt from rent control can fully capitalize on market conditions.
Statewide, California's one-bedroom median rent was $2,055 last month, making Santa Monica's $2,900 median 41% above the state average. At the other end of the spectrum, San Bernardino and Palmdale tied as the most affordable markets at $1,400 for one-bedroom units.
Development activity continues despite market challenges. The city has 39 projects in its development pipeline, with approximately two-thirds approved and 23% under construction. Over 2,300 new multifamily units are currently under construction, which could help address the housing shortage driving high rents.
City officials have taken proactive steps to address housing needs, issuing requests for proposals in July 2025 for three city-owned sites to be developed as predominantly affordable housing projects totaling approximately 1,000 units.
Looking ahead, upcoming events including the 2026 World Cup and 2028 Olympics are expected to boost demand across all real estate sectors. The combination of returning tourists, new residents from planned developments, and pro-business city initiatives implemented through 2028 may help revitalize struggling commercial segments while maintaining pressure on the already tight rental market.