Q1 2025 Orange County Industrial Market Report
Market Overview
Demand for industrial space in Orange County decreased since 2023, which continued into Q1 2025. The drop in demand led vacancy for the metro to record a rate of 5.5%, which is in the bottom half of the 20 largest industrial markets nationally. The current vacancy level can also be attributed to the lack of leasing activity, with several projects completed in the last several years still up for lease. Vacancy will rise more this year if the properties under construction are not leased upon completion, but there is a silver lining ongoing in the market. Consumers have spent more on goods in Orange County, and e-commerce activity also recorded an uptick. If these trends continue, Orange County should be on its way to record stable performance levels.
- Rent growth in Orange County slowed, due to a drop in demand.
- The newest construction stretches across the county to the southern area of Irvine Spectrum Center.
- Orange County remains one of the most expensive markets in the nation, with average rents per square foot above $15.00.
Rents | Vacancy | Construction
Northern submarkets stand out for the highest square footage under construction.
While leasing activity remains slow, renewals make up the most deals signed in the market. Despite the general slowdown that pushed vacancy to 5.5%, most leasing activity has been ongoing for properties larger than 100,000 square feet. This trend continued into the first quarter, with Straub Distributing Company taking up 281,548 square feet in Anaheim. To account for lease slowdowns, landlords have lowered rents and begun offering concessions on properties. Rent growth decreased to -1.3% in the first quarter, but Orange County remains one of the most expensive markets nationally for its average rent per square foot.
There is over 2 million square feet scheduled for finalization this year, with 707,000 delivered in the first quarter. All of the 20 properties underway are under 250,000 square feet, due to land limitations. New construction has been concentrated in North County cities, which include Anaheim, Garden Grove, and Fullerton. The largest property underway will deliver in Anaheim upon completion in July 2025. It is a Class A warehouse that totals 237,246 square feet, and will include an estimated rent in the $11-14/SF range.
Orange County Industrial Sales
With rent growth slowing, buyers have been able to take advantage of acquiring properties at below-market rates. This activity led to over $1 billion in sales for 2024, and sales volume of $488 million for the first quarter this year. Most sales for the quarter recorded cap rates in the 5% range, with private owners making up the majority of buyers and institutional owners behind them. The largest transaction in the first quarter was for a warehouse that sold for $124 million. The deal was for a Class C warehouse located in Anaheim, and was purchased by the Walt Disney Company in January. Moving forward, buyers may continue to acquire properties at lower rates if new construction is unable to be absorbed.
