Orange County Real Estate Market Reports

Orange County Office Market

Vacancy dropped to 17.3% this quarter but remains elevated by historical standards. Total vacancy is 90 bps above the five-year average. Quarterly net absorption was positive for the seventh-straight quarter, with 115,517 SF in net gains. Tarsus Pharmaceuticals’ occupancy of its new 59,626-SF space at the Spectrum Terrace was this quarter’s largest move-in. 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 when demand was at a peak. Net absorption was negative for the ninth consecutive quarter, falling just under the zero line to -71,869 SF. Two large move-outs by Shaw Flooring (272,897 SF) in Cypress and Tropitone Furniture (200,648 SF) in the Irvine Spectrum are contributors. Vacancy (4.7%) is 260 basis points higher than it was two years ago but remains well below the peak of 6.8% seen during the Global Financial Crisis (reached in 2010). Orange County’s vacancy is among the lowest across the Southwest region. After experiencing rapid growth and reaching an all-time high of $1.65/SF NNN two years ago, asking rents dropped to $1.55/SF NNN. Under-construction activity decreased to 2.0 MSF after five projects totaling 781,142 SF delivered, bringing pre-leasing levels to 9.0% of overall construction.