The Orange County retail market remained tight in Q3 2025, with leasing activity supported by limited new supply and strong tenant demand. Vacancy held near a 16-year low at 3.7%, as demolitions continued to outweigh new construction. Net absorption stayed positive despite isolated store closures, driven by expanding discount and fitness tenants. Large-format leasing reemerged, with several leases exceeding 25,000 SF and notable activity from off-price retailers. Market rents rose 2% year-over-year, moderating from the 4% growth seen in 2024, yet landlords retained pricing power amid scarce vacancies. Average asking rents now sit around $39/SF triple-net, with inland and northern submarkets recording the strongest rent gains while coastal areas showed slower, steadier growth overall.

 

Key Findings

• Recorded $510 million in sales volume, signaling strong investor confidence and robust transaction momentum, as buyers pursued opportunities in a high-barrier, supply-constrained market.
• Market rents averaged $39.13 per square foot, up 1.9% year-over-year, driven by limited supply, strong demographics, and steady retail demand sustaining one of the nation’s priciest retail markets.
• Vacancy held at 3.7%, with just 298,000 square feet under construction and an average 5.4% cap rate, reflecting limited new supply and enduring strength in retail fundamentals.

 

Orange County Retail Supply & Demand Dynamics

Source: CoStar Group, Inc.

 

Orange County Demographics

Source: CoStar Group, Inc.

• Unemployment Rate: 3.9%
• Current Population: 3,718,536
• Households: 1,110,611
• Median Household Income: $117,518

 

Orange County’s economy continues to grow slowly but steadily, with employment barely above pre-pandemic levels and lagging national gains. However, recent data show impressive income growth and a notable expansion of the labor force over the past 12 months, signaling renewed economic momentum. Population outflows and a limited labor supply have previously restrained job growth, though unemployment remains below the state average. Major employers such as Disney and UC Irvine anchor the region, supported by a robust biotech and medical device presence in Irvine. High housing costs and limited affordability continue to challenge both workforce retention and business expansion.

 

Population, Labor, & Income Growth

Source: CoStar Group, Inc.

 

Orange County Retail Construction

Construction in Orange County remains limited, with just 300,000 SF underway—only 0.2% of total inventory and among the lowest nationally. In fact, Orange County has the sixth-lowest share of inventory under construction among the nation’s 40 largest retail markets, underscoring the region’s constrained development pipeline. Demolitions have reduced supply by 1.6 million SF over the past five years as outdated department stores and malls are redeveloped, often into apartments. Notable projects include the 55,000-SF River Street Marketplace in San Juan Capistrano, featuring mostly pre-leased small retailers, and Amazon Fresh’s 53,400-SF site in Laguna Hills nearing completion. Recent completions include Tokyo Central’s 28,000-SF store in Irvine and The Square Cypress, which combines apartments, a hotel, and 31,000 SF of retail anchored by Trader Joe’s.

 

SF Construction Starts

Source: CoStar Group, Inc.

 

SF Under Construction

Source: CoStar Group, Inc.

 

Orange county Retail Sales

Orange County’s retail market remains strong, marked by tight conditions, steady rent growth, and surging investment activity. Over 250 property sales totaling $1.1 billion closed through July 2025, already surpassing annual totals from the previous two years. Sales volume jumped 47% year-over-year in Q1 and more than 150% in Q2, on pace to reach a 10-year high and possibly exceed the 2015 record of $1.7 billion. Private buyers dominate roughly 70% of activity, while REITs’ share recently rose to 30% due to portfolio trades. Cap rates have increased slightly, averaging mid-4% to 6%, supported by ongoing rent growth and strong buyer confidence despite higher interest rates.

 

Orange County Retail Sales Volume

Source: CoStar Group, Inc.

 

By the Numbers

Source: CoStar Group, Inc.

• Sales Volume: $510M
• Price Per SF: $444
• Cap Rate: 5.4%
• Vacancy Rate: 3.7%
• Rent Growth: 1.9%
• Asking Rent Per SF: $39.13
• Under Construction: 298K SF
• Delivered: 45.7K SF
• Absorbed: 394K SF