Published on and written by Cyril Jarnias
Santa Monica concentrates everything investors are looking for: land scarcity, a solid economy, an exceptional living environment, and a historically resilient real estate market. But behind the postcard, the playing field is complex, highly regulated, very expensive, and increasingly technical—especially for commercial real estate. To avoid getting burned, you need to finely understand the numbers, the neighborhoods, the local rules, and… the city’s specific tax system.
This article details real estate investment in Santa Monica, focusing on the commercial sector. It also addresses the links to residential, rental, and local regulatory issues.
A Market Driven by Scarcity and a Supercharged Economy
Santa Monica covers only 8.3 km², squeezed between the Pacific Ocean and already dense neighborhoods of Los Angeles. It’s impossible to expand the city, while demand continues to climb, fueled by a highly diversified local economy.
The city is at the heart of “Silicon Beach”, one of the most dynamic tech clusters in the United States, with dozens of technology, media, and entertainment companies. Hulu, Activision Blizzard, Universal Music Group, Lionsgate, Illumination, as well as Amazon and Sony are among the major employers in the sector. Add to that tourism, healthcare (UCLA Health, St John’s Hospital), creative agencies, and a strong educational sector, notably Santa Monica College.
The combination of tech, leisure, tourism, healthcare, and education sectors generates constant demand for offices, retail, housing, and hotels, ensuring market stability. This resilience was confirmed even during the Covid period, with a temporary slowdown followed by a rebound—particularly pronounced for single-family homes with outdoor space.
Rising Values and Long-Term Strength
In residential, over ten years, prices have more than doubled, with a cumulative appreciation of about 108.8% and an average annual rate of 7.64%. One of the latest median value figures (according to various sources) is around $1.6 to $1.8 million for a typical home, with a median price per square foot around $1,120 to $1,200.
Even though recent years have seen some corrections (some indicators mention –2% to –5% over twelve months at certain points), the long-term trend remains clearly upward, with forecasts of moderate growth, on the order of 2% to 5% per year, in a context of strong competition for limited land.
Commercial Real Estate: A Deep but Selective Market
For an investor, one of the strengths of Santa Monica is the depth of its commercial market. Specialized platforms list around 166 to nearly 190 commercial properties for sale, with about 480 spaces available for lease. On some searches, up to 256 listings mix sale and lease, evidence of a very active market.
The commercial real estate market includes a wide range of properties, from traditional typologies like offices, retail, warehouses, hotels, and multifamily buildings, to more specialized assets such as coworking spaces, commercial lots, artist studios, galleries, sales kiosks, or hangar spaces at airports.
Some Key Figures
The commercial market is characterized by:
| Key Indicator | Indicative Value |
|---|---|
| Average price per sq ft (commercial) | ~$883 |
| Average listing size | 14,776 sq ft |
| Largest available space | 100,700 sq ft |
| Average cap rate (commercial Santa Monica) | ~4.72% |
| Number of sale listings (per sources) | 166 to 189 |
| Properties for lease (commercial) | ~480 |
This average cap rate of about 4.72% immediately illustrates the market’s philosophy: it’s more about capital preservation and long-term wealth creation than a high-yield “cash cow.” Investors looking for 7–8% net will need to look elsewhere; those targeting safety, location, and scarcity find a consistent playing field here.
The Major Families of Available Commercial Properties
The commercial offering in Santa Monica is abundant but highly segmented. Notable types include:
– Classic office buildings, ranging from small 450–1,000 sq ft spaces to complexes over 30,000 sq ft.
– Ground-floor retail, concentrated on strategic arteries (3rd Street Promenade, Santa Monica Boulevard, Main Street, Wilshire, Pico, etc.).
– Industrial or “creative office” spaces, including near the airport or on certain avenues (Colorado, Cloverfield, Euclid).
– Hotels, apartment buildings, and multifamily complexes, often prized for their rental stability.
– Flexible spaces like coworking, shared offices, art studios, kiosks on the Pier, etc.
A non-exhaustive overview of the diversity of properties offered, with their typical uses and associated rental or sale conditions.
Rented for short or long stays, often fully equipped with included services (internet, cleaning).
Available for seasonal or yearly rental, and for purchase. Some include gardens or pools.
Offices, shops, or warehouses for lease or sale, with varying sizes and layouts.
Parking spaces or secure storage boxes for rent, often as a complement to housing or independently.
Exceptional properties (castles, mansions, luxury villas) for sale or rent for events.
Examples of Offices and Retail
| Address / Neighborhood | Type | Size (sq ft) | Conditions (order of magnitude) |
|---|---|---|---|
| 1617 Broadway (Mid-City) | Office for Sale | 16,236 | Also 7 spaces for lease (811–4,197) |
| 2224 Main St (Ocean Park) | Office for Sale | 16,188 | Asking price: $10,395,000 |
| 3221 Pico Blvd (Pico) | Retail for Sale | 2,250 | Asking price: $2,195,000 |
| 2221 20th St (Sunset Park) | “Other” for Sale | 7,086 | $1,675,000 (built 1970) |
| 201 Santa Monica Blvd (Downtown) | Office for Lease | 3,807 | $6.15/sq ft/month |
| 1330 4th Street (Downtown) | Retail for Lease | 7,363 | $2.95/sq ft/month |
| 402 Santa Monica Blvd (Downtown) | Retail for Lease | 15,430 & 17,500 | $4.15/sq ft/month |
| 902 Colorado Ave (Mid-City) | Industrial for Lease | 2,167 | $3.15/sq ft/month |
| 1650 Euclid St (Pico) | Office for Lease | 990–14,567 | $5.45/sq ft/month |
| 2730 Wilshire Blvd (Mid-City) | Office for Lease | 502–10,209 | $5.50/sq ft/month |
| 401 Wilshire Blvd (Wilshire-Montana) | Office for Lease | 1,044–17,872 | $6.15–$6.65/sq ft/month |
| 2444 Wilshire Blvd (Mid-City) | Office for Lease | 800–2,107 | $2.75–$3.25/sq ft/month |
Lease values vary greatly depending on location, building quality, view, prestige, and lease type (gross, net, triple net, etc.). But for an investor, these figures allow sketching income scenarios and comparing different strategies.
Flexible Spaces and Coworking
Santa Monica is also a major playground for flexible spaces, highly sought after by startups, freelancers, and small tech teams.
| Operator / Location | Type of Space | Entry Price | Indicative Capacity |
|---|---|---|---|
| WeWork – 312 Arizona Ave | Private Offices | From $990/month | 1 to 100 people |
| Spaces Santa Monica | Private Offices | From $809/month | 1 to 15 people |
| Spaces Water Garden | Private Offices | From $44,691/month | 1 to 120 people |
| BLANKSPACES – Santa Monica Main St | Offices / Desks | From $30/day | Up to 20 people |
These spaces offer another investment pathway: either by owning the building leased to a coworking operator, or by operating such a concept yourself—provided you have the expertise and a thorough understanding of local demand.
Opportunities Related to City-Owned Properties
Important particularity: The City of Santa Monica owns a significant portfolio of commercial properties—retail, restaurants, surface parking lots, cultural spaces—mainly in downtown and around the waterfront (Downtown, Pier, and beach).
Several opportunities exist:
Several types of spaces are available for lease in Santa Monica. At the airport, hangars, offices, and artist studios are leased through Airport Property Management. The Bergamot Station Arts Center offers a 2,300-square-foot cultural gallery. Kiosks and vendor spots are also available on the Santa Monica Pier. Finally, spaces are open to farmers, vendors, and artists at the city’s four Farmers Markets.
A very emblematic case for commercial investors: the City offers a 4,112 sq ft space on the Pier (256 SM Pier), intended for a “visitor-serving” activity—typically food service, high-traffic tourism retail, or leisure. It’s a rare opportunity at the heart of massive pedestrian traffic, but it requires a solid project aligned with the City’s vision and validated through a selection process.
Acres of the surplus land put up for sale by the City at 1632–1636 5th Street.
Finally, three sites have received official notification (NOA) for the development of affordable housing: 1333 4th/1324 5th Street, 1234 4th Street, and 2525 Michigan Avenue. Here, the investor is more of an operator/partner in a social program than in a purely speculative logic, but these projects often benefit from specific funding and incentives.
Interested investors can register on the City’s ProcureNow platform to be alerted about future requests for proposals, or contact the Economic Development Division ([email protected], +1 310 458 8906) for broader information on public opportunities.
Strategic Commercial Neighborhoods: Where to Invest?
Santa Monica functions as a patchwork of micro-markets. In commercial real estate, certain sectors stand out particularly.
Downtown Santa Monica and 3rd Street Promenade
This is the urban core: offices, retail, dining, entertainment, immediate proximity to the Pier and the Expo Line to Downtown Los Angeles. Here you’ll find office spaces from 700–800 sq ft up to plates of over 20,000 sq ft (e.g., at 302 Colorado Ave, with spaces of 20,287 and 27,242 sq ft, or at 520 Broadway).
On the retail side, 3rd Street Promenade and Santa Monica Place remain premier locations, even though vacancy has become more visible: about a quarter of storefronts were empty during some recent periods. The City has relaxed many rules to encourage new concepts: more flexibility on uses, unit sizes, signage, reduced parking requirements (no parking minimum in this zone), lighter procedures for restaurants serving alcohol, etc.
When investing in a repositioning retail street, anticipate that rents remain high. To attract solid tenants, landlords often need to accept concessions such as rent-free periods (reduced or zero initial rent), financial contributions to fit-out costs, or more flexible lease clauses. Incorporate these elements into your negotiation strategy.
Wilshire-Montana and Montana Avenue
This sector combines upmarket residential (notably the Wilshire-Montana neighborhood and zip code 90403) with a fabric of high-end neighborhood retail: cafes, boutiques, services. Offices on Wilshire Boulevard (e.g., 401 or 201 Wilshire) cater to professionals, firms, and service companies, with rents that can exceed $6/sq ft per month for well-located spaces.
On Montana Avenue, ground-floor retail benefits from a wealthy and very loyal local clientele with strong foot traffic. It’s more a market of permanence than spectacular returns, but vacancy is generally lower than in purely tourist zones.
Main Street, Ocean Park, Sunset Park, Pico
Main Street in Ocean Park offers a mix of independent shops, trendy cafes, yoga studios, coworking, and small creative offices. Lease values are high but lower than prime downtown locations, sometimes with better tenant stability.
In the Pico, Mid-City, and Sunset Park neighborhoods, commercial real estate is characterized by a mix of service businesses (local dining, neighborhood distribution), light industrial spaces, and creative offices. This diversity is illustrated by properties like 3221 Pico Blvd (retail for sale), 2925 Santa Monica Blvd (commercial space), and 902 Colorado Ave (industrial for lease). These neighborhoods also offer some of the most accessible entry prices for an individual investor.
Airport and Industrial Zones
Around the airport and in certain areas of Mid-City, you can still find industrial and storage spaces, sometimes converted into creative offices or studios. Demand for this type of space is strong: last-mile logistics, production studios, labs, etc. Vacancy rates are low, and rents tend to hold up, supported by limited supply on the Westside.
Regulation: A Dense Environment You Need to Master
It’s impossible to discuss investing in Santa Monica without talking about regulation. The city is known for having one of the strictest frameworks in the country:
– Very detailed zoning, with numerous base districts (residential, mixed-use, commercial, employment, Bergamot, Downtown, waterfront, etc.) and overlay districts (parking, neighborhood conservation, beach, moderate-income, etc.).
– Precise planning standards: height, lot coverage, density, parking, landscaping, architectural design, cultural contribution (Private Developer Cultural Arts Requirement), etc.
– Complex rules on permitted, conditional, or prohibited uses in each zone.
– Architectural Review process for many projects, with requirements for urban integration and architectural quality.
– Specific development programs, such as Adaptive Reuse to convert certain buildings into housing, or outdoor dining and parklet programs to support commercial activity.
For a commercial investor, this means two things: the difficulty of developing new construction (which supports the value of existing properties), but also the need to surround yourself with professionals (architects, urban planners, specialized lawyers, local brokers) to put together a compliant project and avoid costly delays.
Rent Control, SB 9, ADU: Impact on Income Properties
Even though the core of this article focuses on commercial real estate, many investors operate mixed-use or multifamily buildings, which are heavily impacted by:
San Francisco’s rent regulation is one of the strictest in the United States, capping rent increases for units built before 1979 (e.g., 2.8% in 2023). Specific California laws apply, such as the Ellis Act, which governs removals from the rental market and imposes a five-year waiting period before re-renting, as well as laws facilitating the construction of accessory dwelling units (ADUs) to densify lots. SB 9 allows, under strict conditions (no recent rental history, no evictions, parking constraints), for the subdivision of parcels and construction of duplexes in certain residential zones.
These factors weigh on the potential for rent increases in older buildings, but also reinforce the appeal of newer constructions, often exempt from rent control, and locations where ADUs or subdivisions are possible.
Local Taxes: Expensive Properties, High Taxes, Mansion Tax
On the tax side, Santa Monica is not a “light” city. Between property taxes and the transfer tax, the real cost for an investor is significant.
Property Taxes: A Structural Burden to Factor In
The median effective property tax rate in Santa Monica is about 1.22%, slightly higher than the California average (1.21%) and above the national average (1.02%). The median home value used in one study is about $884,564, with a median property tax around $10,460 per year—more than four times the national median.
By zip code, the differences are clear:
| ZIP | Median Effective Rate | Median Value | Median Annual Tax |
|---|---|---|---|
| 90401 | 1.24% | $776,869 | $9,653 |
| 90402 | 1.21% | $1,823,781 | $20,829 |
| 90403 | 1.23% | $865,601 | $10,717 |
| 90404 | 1.25% | $685,815 | $8,496 |
| 90405 | 1.24% | $830,663 | $10,321 |
For the investor, these amounts naturally eat into cash flow. The good news: under Proposition 13, the tax value is capped in growth (maximum 2% per year) and often remains below market value, especially with various exemptions (senior citizens, primary residence, etc.). The City keeps only about 14% of the property tax collected; the rest goes to the county and other agencies.
Measure GS: The “Mansion Tax” That Changes the Game Above $8M
Since March 1, 2023, Santa Monica has applied a new layer of municipal transfer tax, passed by referendum (Measure GS), intended to fund homelessness prevention, affordable housing, and public schools.
The rate is progressive:
| Price Bracket (Transfer Value) | City Rate (per $1,000) | City Rate (%) |
|---|---|---|
| Under $5M | $3 | 0.3% |
| $5M to $7,999,999.99 | $6 | 0.6% |
| $8M and above | $56 | 5.6% |
Add to that the state tax ($1.10/$1,000) and the county tax ($0.55/$500). In practical terms, the bill skyrockets above $8M: a property sold for $8 million generates about $448,000 in city tax, versus about $48,000 if the price is just below ($7.999M), a difference of nearly $400,000.
The effects were immediate:
Luxury residential sales (over $8M) dropped by 53% year-over-year.
For a commercial investor, this measure has major implications for:
– Exits (resale of the asset above $8M).
– Deal structuring (tax-sharing clauses with the buyer, price negotiation, possibly splitting assets).
– Geographic arbitrage (some developers now preferring neighboring cities without such a heavy tax on large transactions).
Attempts at partial exemption, specifically for multifamily buildings, have been discussed politically but (as of the data date) have not succeeded. Some affordable housing projects carried out by non-profit organizations or community land trusts may, however, benefit from partial exemptions from tiers 2 and 3, under conditions and through a certification process.
Profitability, Financing, and Management: What an Investor Must Check
With an average price per sq ft around $883 and cap rates in the 3–5% range (4.72% average for commercial), the key in Santa Monica is not to explode cash flow in year one. The game is played on:
– Income stability (long commercial leases, solid tenants).
– Rent indexation (inflation, fixed increase clauses).
– Long-term appreciation (land appreciation, repositioning, restructuring).
– Tax optimization (depreciation, expense deductions, capital gain deferral, 1031 exchange in the U.S. if applicable for American investors, etc.).
Financing: Banks, SBA, Commercial Loans
For income-producing and commercial properties, banks primarily focus on the cash flows generated by the property (actual and projected rental income). Common types of financing include:
Different solutions to finance the acquisition or development of commercial real estate.
Standard commercial loans offered by banks for real estate projects.
Loans guaranteed by the Small Business Administration for businesses that occupy part of the premises.
Specific mortgage loans from financial institutions specializing in real estate.
Investments from private investors, club deals, or real estate crowdfunding platforms.
With interest rates around 6.7% (order of magnitude in 2025), the interest burden is heavy, especially on assets with low net rates. Hence the importance of bringing a substantial down payment (often 30–40% in commercial), and carefully modeling the bottom line.
Property Management and Fees
Management fees for commercial properties generally range between 5% and 10% of collected rents. For residential rentals, some sources mention 8–10%. Certain companies—such as Muselli Commercial Realtors, RPM Real Estate Services, Lotus Properties, or groups specializing in managing shopping centers or multifamily portfolios—operate in Santa Monica and across the Westside.
Add to that:
– Property taxes (about 1.22% of value),
– Insurance (often rising, especially for fire and climate risks),
– Maintenance and repairs (aggravated by saltwater corrosion near the beach),
– Compliance costs (seismic retrofitting, fire safety, accessibility, etc.),
– Legal and accounting fees.
In many triple net (NNN) commercial leases, a significant portion of these expenses is passed through to tenants (taxes, insurance, maintenance). But for smaller spaces, or depending on usage, the landlord may retain some.
Investment Strategies: From Core to Value-Add
In such an expensive and regulated market, not all strategies are equal. Several approaches stand out:
Four distinct strategies are presented: a “core” strategy for safe, low-yield assets; a “value-add” strategy for renovating and repositioning underperforming assets; an “opportunistic” strategy for development with higher risk; and a mixed residential/commercial strategy requiring particular attention to rent regulation.
The choice will depend on the investor’s risk profile, time horizon, skills (project management, municipal relations, commercial marketing, etc.), and ability to absorb regulatory or tax shocks (like Measure GS).
Building a Local Team: Essential
In Santa Monica, the difference is often made on the details: understanding which use is permitted by zoning, anticipating Architectural Review criteria, negotiating with the City for a lease on a public property, structuring a high-performing NNN lease, or putting together a proposal for a gallery at Bergamot Station.
The following professionals are nearly indispensable:
To succeed in commercial real estate investment in Santa Monica, it is essential to surround yourself with a team of local experts. Here are four essential professionals.
Expert in actual rents, institutional owners, and off-market transactions. Examples: Muselli Commercial Realtors or RPM Real Estate Services.
Knowledgeable in California law and Santa Monica local regulations (rent control, Ellis Act, Measure GS, zoning).
Accustomed to working with City Planning, local plans (LUCE, Local Coastal Program), and various city divisions.
Essential if the investor does not wish to manage the property directly.
Conclusion: A Demanding Market, But Rare and Deep
Investing in real estate in Santa Monica—and particularly in commercial real estate—is anything but a passive investment. Between the stratospheric prices, heavy taxes (especially above $8 million), urban planning regulations, rent control, and architectural requirements, the intellectual and financial entry ticket is high.
But in return, the city offers:
The region benefits from a powerful economic base (Silicon Beach, tourism, healthcare, education), global attractiveness, and an exceptional brand image. The market is characterized by chronic land scarcity, supported by protective planning rules, but offers market depth with hundreds of available commercial assets. Unique opportunities exist through City-owned properties (Pier, airport, Bergamot, surplus land).
For a patient, well-advised investor with a long-term vision, Santa Monica remains one of the most interesting markets on the West Coast for a “blue chip” real estate portfolio. The goal is not to find an easy “deal,” but to build a coherent strategy aligned with the city’s sustainable fundamentals: scarcity, quality, regulation… and the ocean a stone’s throw away.
Disclaimer: The information provided on this website is for informational purposes only and does not constitute financial, legal, or professional advice. We encourage you to consult qualified experts before making any investment, real estate, or expatriation decisions. Although we strive to maintain up-to-date and accurate information, we do not guarantee the completeness, accuracy, or timeliness of the proposed content. As investment and expatriation involve risks, we disclaim any liability for potential losses or damages arising from the use of this site. Your use of this site confirms your acceptance of these terms and your understanding of the associated risks.
Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
