MARKET DRIVERS
Orange County’s office market showed steady improvement throughout the second quarter of 2025, outperforming the national average. Net absorption was slightly negative, pushing the vacancy rate to 12.5% from the previous quarter. Tenants still prefer high-quality buildings with modern amenities, especially in the Central and Airport Area submarkets, which remain the hub of demand.
The average asking rent has remained steady at $2.82 per square foot each quarter, but it is slightly lower than it was a year ago. The flight-to-quality trend persists, with tenant demand for premium office buildings in desirable areas, complete with amenities, remaining the key driver of recent lease signings.
ECONOMIC REVIEW
Orange County’s economy remains fundamentally resilient, though it continues to face headwinds in the labor market. Job growth has slowed due to persistent labor shortages, challenges a modest increase of 0.73% is forecasted by year-end. The county’s unemployment rate rose to 3.6%, yet well below the statewide average of 5.3%.
Despite sector-specific losses in financial services and construction, key industries such as healthcare, hospitality, technology, and logistics continue to expand, supporting broader regional stability.
NEAR-TERM OUTLOOK
The trend of redeveloping abandoned suburban office buildings remains a key strategy, with ambitions to convert several into other real estate endeavors. The success of recent conversions is leading to increased occupancy, despite the lack of new developments.
Tenant preference continues to lean toward newer, more innovative buildings, where leasing activity has remained positive. In response, landlords in more challenged submarkets are pursuing competitive strategies—including repositioning efforts, property upgrades, and generous tenant improvement packages—to attract and retain tenants in a dynamic market environment.
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