Orange County Real Estate Market Reports

Orange County Office Market

Vacancy dropped from 17.5% last quarter to 17.2% following a surge in net absorption. Total vacancy is 40 bps above the five-year average. Quarterly absorption is back in the green, totaling 370,812 SF of net gains, marking the eighth positive quarter in the last nine. This quarter’s top five move-ins totaled 230,184 SF, all of which were from the Airport Area and South County. 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. The last project delivered two years ago. 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

This quarter marks the eighth net absorption loss in the last 11 quarters, bringing the total to -703,353 SF. The top three move-outs of the quarter, which originate from West County and North County, totaled 606,670 SF alone. Vacancy (5.3%) is 260 basis points higher than it was two years ago but remains well below the peak of 6.7% seen during the Global Financial Crisis (reached in 2010). Orange County’s vacancy is the second lowest in the Southwest behind Los Angeles. After experiencing rapid growth and reaching an all-time high of $1.65/SF NNN two and a half years ago, asking rents dropped to $1.49/SF NNN. Under-construction activity dropped to 1.6 MSF after six projects totaling 648,796 SF delivered, bringing pre-leasing levels to 19.0% of overall construction.