MARKET DRIVERS
At the close of 2025, Orange County’s industrial market remained in a state of adjustment, characterized by reduced tenant interest and rising vacancy rates due to recently completed construction. Total availability of industrial space—including subleases and space under construction—increased to 9.0%, while the vacancy rate rose to 6.7%. Negative net absorption in the fourth quarter indicates a decline in occupancy, resulting in a year-to-date loss exceeding 2M SF.
Smaller-format buildings continue to lease much faster than larger box facilities. In Q4 2025, vacancy climbed to 6.7% as newly delivered projects from 2024 and 2025 remained unoccupied. To attract tenants and accelerate transactions, landlords are responding to lower asking rates by offering enhanced concession packages, such as free rent.
ECONOMIC REVIEW
Orange County’s economy is growing slowly but steadily. Employment growth has lagged behind the national average due to labor shortages and a population shift to more affordable regions during the pandemic. The county’s diverse workforce—particularly in advanced manufacturing, healthcare, and life sciences—supports long-term demand for industrial space. However, logistics-related space requirements have declined amid falling import volumes and rising operating costs. With new supply entering the market as demand softens, vacancy rates face additional upward pressure.
NEAR-TERM OUTLOOK
Market stability is anticipated in 2026 as the number of active construction projects declines significantly from its cyclical peak. This trend should continue to benefit tenants with substantial space requirements. Developers are delaying new project starts due to high barriers to surplus supply. Asking rates are expected to remain steady through 2026, then gradually increase as vacant space is absorbed. Investor activity surged in 2025, approaching record highs, driven by price adjustments and Orange County’s high barriers to entry.
4Q 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 Climbs: Total vacancy reached 6.7%, up from 4.1% year-over-year.
- Asking Lease Rate Holds: Average asking rent ended at $1.49 PSF/Mo (NNN), down 6.3% YoY.
- Negative Net Absorption: Q4 posted -337,194 SF, with year-to-date losses exceeding 2.2M SF.
- Leasing Activity Slows: Quarterly leasing totaled 1.4M SF, down 58% YoY.
- Investor Activity Strong: Average sale price hit $310.50 PSF, with a 5.9% cap rate.
- Availability Rate Rises: Overall availability increased to 9.0%, reflecting new deliveries and sublease space.
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