Q1 2025 Orange County Multifamily Market Report

Orange County Key Findings

• Orange County boasts the second-lowest vacancy ate (4.0%) among the nation’s 50 largest markets, well below the national average of 8.1%.
• Looking ahead, the local supply pipeline is expected to deliver over 3,000 new units in 2025.
• Although demand remains strong, absorption in Orange County continues to lag historical averages, largely a result of limited new supply available for immediate occupancy.

 

By the Numbers

• Sales Volume: $99.8M
• Market Sale Price Per Unit: $442K
• Cap Rate: 4.5%
• Rent Growth: 4.0%
• Average Market Asking Rent Per Unit: $2,719
• Units Under Construction: 5,752
• Units Delivered: 321
• Units Absorbed: 587 | Q1 2025 | Source: CoStar Group

 

Orange County Demographics

• Unemployment Rate: 4.2%
• Current Population: 3,145,837
• Households: 1,098,505
• Median Household Income: $117,933

Professional and commercial services, as well as leisure and hospitality employment, have the highest job location quotients in the market, at 1.3.

 

Market Performance

While below historic norms, Orange County’s apartment absorption remains positive in 2025, owing to continued job growth, greater affordability, and increased capacity. Incomes have risen faster than market rents over the last three years. Furthermore, the recent development of apartment complexes has created space for new occupants. As of the second quarter of 2025, absorption over the trailing year had climbed to 2,700 units. The recently lifted restrictions on ADU development in California have also aided in the increase of housing stock. The law has been used by multifamily properties to increase density. The state’s pro-development legislation also opens up opportunities for developers to rebuild outdated industrial, office, and retail center sites into new multifamily housing. Expanding on legislation, the passing of the California Assembly Bill 2747 (AB 2747), will potentially help landlords attract financially responsible renters seeking credit-building opportunities. As a result, the tenant pool may become more reliable, and turnover rates could see a decrease.

 

Employment in the area is growing. As demand for return-to-office increases, more professionals are renting apartments in Orange County for proximity to their workplace. Aside from job prospects, Orange County continues to attract tenants thanks to its great weather, beaches and recreation facilities, top-ranked schools, and low crime rate.

 

 

Performance by Class Type

Source: CoStar Group

	Units	Vacancy Rate	Asking Rent
Class A	76,481	5.4%	$3,258
Class B	88,234	3.6%	$2,666
Class C	95,842	3.1%	$2,086

 

 

Orange County Multifamily Supply & Demand Dynamics

Source: CoStar Group

 

Orange County Under Construction

Source: CoStar Group

 

The 5,800 apartments under construction represent 2.2% of Orange County’s existing apartment inventory base of over 250,000 units. Apartment development in Orange County remains limited due to land constraints and, at times, difficult approval processes. For example, a 500-unit Anaheim Hills development was denied in November 2024 owing to concerns over density and wildfire evacuation. The Irvine Company’s Colonnade at The Marketplace redevelopment and Simon Property Group’s Brea Mall Sears redevelopment indicate a new trend. Many, if not all, of the apartments built in the coming years will be attached to shopping malls, as investors have proposed developing more than 12,000 housing units at 12 mall sites throughout the county.

 

Construction Starts

Source: CoStar Group

 

Under Construction

Source: CoStar Group

 

Orange County Sales Activity

Source: CoStar Group

 

Despite a nationwide slowdown in sales activity caused by rising interest rates and tighter lending conditions, Orange County’s apartment market remained resilient. Investors are drawn to the market’s high demand, low supply risk, and outperforming rent growth. Institutional investors and REITs, many of whom are based in Los Angeles, continue to be engaged, albeit some institutional capital remains on the sidelines. Acquisition yields in Orange County are among the lowest in the country, owing to solid market fundamentals and a large number of wealthy local investors. Nonetheless, asset prices have fallen from high levels in recent years due to increased capital expenses. Cap rates for the overall market have compressed since Q1 2024, sitting between 3% and 4%.

 

Buyer Composition

Source: Real Capital Analytics

 

Submarket Highlights

North County

The market remains an affordable area in comparison to the rest of Orange County, with rent levels trending 10% below market average, even amongst high-quality inventory.

 

Anaheim

Anaheim’s built-out environment and lower rent possibilities make apartment construction rare, however, numerous luxury complexes have been developed in recent years.

 

Central OC East of I-5

The area’s apartment rents continue to rise gradually due to strong demand, with rent growth standing at 2.4%.

 

Tustin

Limited supply growth has prevented vacancy increases, compressing the rate to 2.6%.

 

Central OC West I-5

Vacancy is decreasing as new properties lease up, reaching 4.1% in Q1 2025.

 

Huntington Beach/Seal Beach

Vacancy remains low at just 3.4% as of Q1 2025.

 

Costa Mesa

Costa Mesa’s average rent levels fell below the market average in 2021 and are expected to continue lower moving through 2025.

 

Irvine

Deliveries will be substantial for several years, as the approximately 4,200 units currently under construction will increase inventory by 9.7% when completed.

 

Newport Beach

Vacancy is declining and measures a compressed 2.4%, as a result of newly turned positive absorption after two years of running negative.

 

South County

Apartment vacancy rate is 5.1% as of Q1 2025, a slight decrease from its historical average of 5.4%.