MARKET DRIVERS
In early 2026, Orange County’s office market showed signs of stabilization. The direct vacancy rate reached 11.3%, a 3.8% year-over-year decrease and below the national average. Strong net absorption and faster tenant move-ins were the primary drivers of this improvement.
More companies are downsizing, while others explore owner-user alternatives. This shift is reflected in lease activity, which totaled approximately 1.6M SF.
Changes in inventory are being driven by demand for suburban corporate offices, redevelopment of aging buildings, and interest in converting spaces into mixed-use or medical facilities. Tenant-occupied properties have d since 2020, further reducing available inventory. Rising competition is supporting long-term stability, as evidenced by 324,000 SF currently under construction and 43,000 SF recently delivered.
ECONOMIC REVIEW
Orange County’s economy remains diverse, with demand fueled by businesses in the office, industrial, healthcare, and technology sectors. Government agencies and healthcare organizations have also contributed to momentum through new facilities and relocations.
Demand for premium office space is contributing to a notable decrease in vacancy rates for high-rise buildings. However, office-using employment is being influenced by ongoing labor market challenges and elevated operating costs. Financial constraints and rising construction expenses have hampered new office development, especially for traditional office product, although they have boosted demand for repurposing existing buildings and specialized space.
NEAR-TERM OUTLOOK
The outlook for 2026 is cautiously optimistic, driven by constrained supply and continued declines in vacancy. Demand is expected to favor high-quality office. Rental growth is currently moderate, with average asking rents at $2.86 PSF. Despite rising build-out costs, landlords continue to offer concessions to attract tenants and command higher lease rates.
With limited new construction and continued inventory reduction, the market is positioned for gradual stabilization. Further improvement will depend on sustained leasing demand, a recovery in office-using employment, and potential rent growth.
1Q 2026 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 Rate Declines Year-Over-Year: Direct office vacancy fell to 11.3% in 1Q 2026, down 3.8% from the prior year and below the national average, signaling improving market fundamentals.
- Net Absorption Turns Positive: Orange County recorded 68,829 SF of positive net absorption in 1Q 2026, driven by stronger tenant move-ins and reduced relocations.
- Leasing Activity Remains Active: Total leasing volume reached approximately 1.6 MSF in 1Q 2026, led by suburban submarkets and high-quality office properties.
- Asking Rents Trend Upward: Average full-service asking rents increased to $2.86 PSF, reflecting moderate rent growth despite ongoing concession activity.
- Limited New Supply Supports Stability:Only 43,000 SF was delivered in 1Q 2026, with 324,000 SF currently under construction, helping constrain supply and support long-term vacancy reduction.
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