Orange County Real Estate Market Reports

Orange County Office Market

Vacancy dropped to 17.5% this quarter but remains elevated by historical standards. Total vacancy is 140 bps above the five-year average. Quarterly net absorption is positive for the sixth quarter in a row, totaling 62,373 SF in net gains. The largest move-in of the quarter was by Hyundai Glovis occupying its new 53,282-SF space in Irvine. Muted office demand is prompting developers to scrap planned office projects, leaving the construction pipeline empty for the first time since the Global Financial Crisis in 2008. Some underperforming office properties will find new life as multifamily, industrial or medical developments. This, along with owner-user sales, will exert downward pressure on the region’s office inventory, vacancy and availability.

Orange County Industrial Market

Current leasing activity is slow relative to 2021-2022. Net absorption is out of the red for the first time in seven quarters, with the market accruing 389,733 SF of net gains. Move-ins by Weber Distribution (136,998 SF), 7 Diamonds (87,000 SF) and Toyota Racing Development (73,218 SF) are contributors. Year-end vacancy (4.0%) is 220 basis points higher than it was two years ago but remains well below the peak of 6.8% from the Global Financial Crisis (reached in 2010). Orange County’s current vacancy is the lowest across the Southwest region. After experiencing rapid growth and reaching an all-time high of $1.64/SF NNN last year, asking rents have dropped to $1.55/SF NNN and are expected to normalize. Under-construction activity increased to 2.4 MSF after three projects totaling 223,361 SF broke ground, bringing pre-leasing levels to 7.7% of overall construction.