MARKET DRIVERS
By late 2025, Orange County’s office market remained stable with improving infrastructure.
Leasing stayed strong in the Airport Area and Irvine Spectrum, while direct vacancy held at
11%, reflecting steady demand for Class A space. Older high-rises and mid-tier buildings
saw selective gains as tenants sought value without sacrificing amenities and transit access.
With few new projects, large spaces in top-tier buildings are scarce, prompting tenants to
start searches early to secure prime locations.
Average asking rates have stabilized in the mid-$2.70s PSF (full-service) after earlier declines.
Landlords continue offering incentives—free rent and property upgrades—to secure reliable
tenants ahead of anticipated market shifts in 2026. Net absorption has remained positive for
the second consecutive quarter.
ECONOMIC REVIEW
Orange County’s economy remains strong, driven by corporate services, technology, healthcare,
and government contracting. Office-using sectors expanded gradually, offsetting declines in
older industries like construction and banking. Despite growth in key high-value segments,
overall job growth has slowed due to high housing costs and a shortage of qualified workers.
The region has emerged as a hub for AI and life sciences, driving demand for adaptable
buildings, energy efficiency, and modern workplace solutions. Healthcare continues to add
jobs, helping counter broader declines in the traditional financial services sector.
NEAR-TERM OUTLOOK
The 2026 outlook is cautiously optimistic, with several strengths. High-quality properties
are expected to appreciate faster as tenants seek modern spaces with enhanced amenities.
Repositioning and redevelopment will remain key strategies, particularly in older suburban
areas still below pre-pandemic performance.
Landlords are likely to gain negotiating leverage for premium properties, given the limited
pipeline of new office buildings. Investors and private funds increasingly believe prime real
estate has reached its lowest price point, signaling confidence in long-term value.
4Q 2025 Orange County Office Market: Key Data Points
Explore our full Orange County industrial market review for deeper insights into leasing trends, sale activity, and submarket performance.
- Vacancy Holds Steady: Direct vacancy rate closed at 11.7%, unchanged year-over-year.
- Asking Rents Stabilize: Average asking rent remained at $2.78 PSF (full-service), down slightly from last year.
- Leasing Activity Declines: Total leasing volume reached 1.59M SF, a 33% decrease compared to 4Q 2024.
- Positive Absorption Continues: Net absorption totaled 150,937 SF, marking the second consecutive quarter of gains.
- Construction Pipeline Remains Limited: Only 32K SF delivered this quarter, with 367K SF still under development.
- Sales Volume Softens: Approximately 1.3M SF traded in 4Q 2025, down 23% year-over-year.
Click here to subscribe to Kidder Mathews market research.