MARKET DRIVERS
During 1Q 2026, Orange County’s industrial market reported cautious stability, marking an end to a long period of limited demand. The direct vacancy rate remained stable at 5.7%, a trend that carried over from the previous year’s end, driven by moderating availability growth and a surge in new lease activity to a four-year high in the preceding year. Compared to late 2025, this represents a significant improvement.
The market shows signs of recovery and is trending in a more favorable direction, with an overall availability of 8.8% including subleases and space under development. Net absorption in the 1Q 2026 was positive, reaching 58,000 SF. This was supported by strong leasing activity, which saw a total of 1.57M SF transacted. This marked a continuation of the increasing trend first observed in 2025, with small to medium-sized spaces being the primary source of support. This was a positive sign after two years of significant declines in occupancy.
ECONOMIC REVIEW
Orange County’s economy is growing slowly, with job gains limited by skilled labor shortages and high operating costs. The industrial market is anchored by large-scale users and logistics operations that support steady, long-term demand, while most leasing activity is driven by smaller tenants and renewals.
New supply deliveries for the 1Q 2026 totaled 435,000 SF. Expected new supply deliveries may influence vacancy rates in specific submarkets because fewer new buildings are anticipated. This situation will likely leave a significant amount of attractive lease space available. Developers are reducing their asking rates and offering more favorable terms on large, vacant buildings to attract tenants, indicating the market is absorbing the recent excess supply.
NEAR-TERM OUTLOOK
Market conditions are forecast to rebalance gradually through 2026, as development activity declines and available space is absorbed, even if leasing activity continues at healthy levels. New projects are being put on hold by developers because of the market’s current surplus. Investor confidence in Orange County’s appeal was evident in owner-user acquisitions, and high investment activity continued, surpassing the previous year’s average. It is anticipated that asking rents will stabilize and then slowly decline as vacant spaces get absorbed. As the market becomes more competitive, modest growth might take place.
1Q 2026 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 Remains Stable: Direct industrial vacancy closed the quarter at 5.7%, holding near prior-quarter levels as availability growth moderates.
- Positive Net Absorption Returns: Net absorption totaled 58,051 SF in 1Q 2026, marking a return to positive territory after prolonged occupancy declines.
- Leasing Activity Gains Momentum: 1.57M SF of industrial space was leased during the quarter, supported primarily by small- to mid-sized tenant demand.
- Asking Rents Trend Lower: Average industrial asking rents declined to $1.46 PSF (NNN), down nearly 6% year-over-year as landlords adjust to competitive conditions.
- New Supply Adds Pressure: 435,000 SF of new industrial product delivered in 1Q 2026, while fewer future projects are anticipated as developers pause activity.
- Sales Prices Hold Firm: The average industrial sale price reached $307.82 PSF, with cap rates averaging 4.9%, reflecting continued owner-user and investor confidence.
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