MARKET DRIVERS
In Q1 2025, Orange County’s office market performed better than the national average, showing signs of a slow but positive recovery. Orange County’s office vacancy rate has fallen to 11.8%, a 60-basis-point decrease from their peak a year ago. The market is seeing improved net absorption, but the number of new leases remains the stagnant.
In 2025, office tenants in Orange County either reduced their space or extended their agreements. Market tenants largely approve of their office buildings, although they recommend several needed upgrades.
ECONOMIC REVIEW
The expansion of Orange County’s diversified economy is still slowing down because of a shortage of workforce. Orange County’s unemployment rate was below 4.1% over the same period, compared to California’s 5.5% rate.
Orange County’s labor market will probably feel the effects of both regional and national factors. The change in administration has reshaped the national economy, possibly affecting unemployment, federal programs, and the area’s overall job market.
NEAR-TERM OUTLOOK
In the near term, several unused suburban office buildings were placed in the market and redeveloped into major industrial logistics hubs. Net absorption among new creative buildings returned to a positive level this year. Tenants are once again looking for upscale office buildings in prime locations close to amenities, and the Airport Area region is driving the most recent lease activity.
A rising trend among landlords in soft markets is using redevelopment and tenant improvement allowances as a major tenant attraction strategy. The low vacancy rate is a result of Orange County’s limited ability to undertake large-scale construction projects.
Click here to subscribe to Kidder Mathews market research.