MARKET DRIVERS
The Orange County industrial market remains tight, although demand has softened following years of outstanding performance. In the second quarter of 2024, the local region’s vacancy rate was 4.3%, which is significantly lower than the 6.5% national average for the major industrial markets. The steady performance of this market is why it continues to play a pivotal role in Southern California’s industrial sector.
The first half of 2024 experienced a steady expansion of Orange County’s industrial base, driven by new development projects coming online. The region’s prime location near major ports and urban centers continues to attract investors and developers.
ECONOMIC REVIEW
Orange County’s proximity to major population centers and transportation hubs was advantageous for US industrial occupiers seeking to enhance their supply chains and reduce delivery times.
In addition, the technology industry played a significant role in helping demand in the region by providing specialized spaces necessary for high-tech production and research and development. This trend highlighted Orange County’s role as a technology and innovation hub for the broader Southern California region.
NEAR-TERM OUTLOOK
There are indications that absorption will be negative or minimal for the duration of 2024, as tenant demand has not fully recovered. The indication that the majority of extended leases in the industrial sector of Orange County were renewed in 2024 suggests that tenants prioritize stability over growth through a relocation. A significant portion of these transactions have occurred in mid-sized buildings with recent lease activity.
In the second half of 2024, there was an increase in investment activity. Real estate investment trusts (REITs) and institutional investors showed a strong interest in buying industrial assets. In response to the heightened demand for modern and functional industrial facilities, there was a surge in construction and renovation activities with the stabilization of interest rates.
Click here to subscribe to Kidder Mathews market research.