MARKET DRIVERS
The Orange County industrial market, like many others, has been navigating a period of normalization for much of 2025. Although net absorption was negative, there has been a notable uptick in leasing activity in the third quarter, particularly for buildings under 20,000 SF, which helped push total leasing above 1.4 million square feet.
Lease rates continue to soften, reaching a point where tenants are seriously considering relocation rather than renewal. Demand for larger industrial spaces is expected to remain subdued until economic conditions become more predictable. Factors such as tariffs, import/export traffic, and supply chain adjustments could influence this demand, but their full impact is not yet clear.
Institutional buyers have been re-staffing their acquisition teams and returning to the market, which is a promising sign. Developers continue to complete projects already in the pipeline, but are exercising caution in acquiring land for new development.
ECONOMIC REVIEW
Orange County’s economy remains stronger than the national average, despite a slower
increase in employment than before the pandemic. The region’s job market, which includes advanced manufacturing, healthcare, and life sciences, creates a steady need for industrial properties because of its variety. Labor shortages persist due to ongoing business growth and a limited pool of qualified workers. Reduced port activity has contributed to lower demand for logistics-related space. Overall, the market remains stable due to high entry barriers and limited new construction.
NEAR-TERM OUTLOOK
Most industry experts anticipate that the market will begin to rebound in the coming months, with lease rates stabilizing and potentially trending upward. Interest rates are expected to adjust downward, easing some of the pressure that has slowed decision-making over the past year. Meanwhile, the impact of tariffs appears to be minimal, and new development activity has remained in check, preventing an oversupply of inventory. Landlords are responding to current market conditions by offering a balanced mix of space for lease and sale. Collectively, these factors suggest a potential increase in transaction activity and a renewed upward trajectory in property values.
3Q 2025 Orange County Industrial Market: Key Data Points
Explore our full Orange County industrial market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Rate Rises Slightly: Direct vacancy increased to 5.5%, up from 5.2% in Q2 and 4.0% year-over-year.
- Lease Rates Decline: Average asking rent dropped to $1.49 PSF NNN, a 6.3% decrease year-over-year.
- Leasing Activity Rebounds: Total leasing volume reached 1.37M SF, with notable demand for sub-20K SF buildings.
- Net Absorption Negative: Net absorption recorded at -202K SF, indicating continued tenant turnover.
- Sales Price & Cap Rate: Average sale price was $350.94 PSF, with a cap rate of 6.4%.
- New Deliveries Hold Steady: 525K SF of new industrial space delivered in Q3 2025.
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